How is the coronavirus affecting my investment?

An update on investment markets

In March 2020, investment markets saw a dramatic downturn due to the outbreak of coronavirus and the effect that lockdown would have on the economy. You may be wondering what has changed in markets since then, and how the outlook for your investments may have changed.

The falls in the markets back in March were caused by business-as-usual being disrupted on a global scale, and the fears for the effect it would have on the earnings and share prices of companies across the world. By mid-June, many equity (or share) markets around the world had returned to close to where they were before the “Covid crash”, and by the end of 2020 had recovered to deliver positive returns.

But there is still a long road ahead, as many economies remain at least partially shut down until more people can be vaccinated. Volatility – which is when shares and markets have big sudden swings – is still an ongoing concern. Central banks (such as the Bank of England and the US Federal Reserve) have taken sweeping actions to pump money back into the system, while governments have announced huge relief packages. This has helped shares recover, but at the same time, the economic outlook is still uncertain. Additionally, the concern in some areas of the market is that a rapid economic recovery – while positive – could lead to higher interest rates and inflation, which could keep some investments somewhat volatile.

We are still in challenging times, but the outlook is improving. It’s important to remember that a certain amount of volatility in markets is normal, and that a long-term investment mind-set remains crucial. Market reactions are often short-term and emotional, whether based in fear or optimism. Share prices, for that reason, often reflect what professional investors think might happen in the future, rather than what is happening in the moment. That’s why it’s so important to keep focused on long-term goals, rather than the day-to-day fluctuations in the markets.

A long-term investment

A pension is a long-term investment. We know it’s difficult seeing your pension and investment values fluctuate. However, as we’ve seen through previous declines (such as the Global Financial Crisis), during periods of uncertainty the stock market will drop, but it has also recovered over the long term. Someone who had closed out their investments in March 2020, for example, will have missed out on the market recovery that happened by the end of the year.

While past performance can’t be relied on to predict the future, in our view this current crisis will be a painful but relatively short period of struggle. Taking a longer-term view over your investments can allow your funds to grow over time.

If you want to know what you're invested in, and how current conditions are affecting your account, please speak to your financial adviser. We can help you find a financial adviser if you don't already have one. Advisers will normally charge for advice.

Finally, to learn more about investing during times of volatility, watch our video series.