Reflections

The coronavirus (COVID-19) and the associated lockdown have impacted us all. Whether through health, work, daily routines or our loved ones - most of us can describe how life has changed.

For those who invest, there has also been the added worry of how the stock markets have performed. Understandably many of our customers want to know more. There are two things worth considering:

During dramatic events it’s tempting for investment managers to make frequent changes to assets making up investment funds. On the other hand, the experienced investment managers at Coutts look beyond the immediate situation and use careful consideration before acting too hastily. As an example, they recently sold some European shares with a view to reduce risk, while continuing their patient and cautious approach to minimise costs and maximise potential returns in the longer term.

Times like these can also create opportunities, so the investment managers are ready to act if the right one comes up.

For a full update on Q1 2020 fund performance, visit here.

It’s easy to get caught up in recent events, but it is interesting to look back at some examples of big stock market falls in the past and what followed.

1987

In 1987 Rick Astley topped the charts and St. Mirren won the Scottish Cup. In October that year the American stock market index S&P 500 fell by 18% for reasons that have never been clear. The losses in America spread elsewhere. The UK stock market index FTSE 100 fell by 23% in just two days.

At the time, some believed this was the end of traditional investment gains.

But by the year 2000 share prices had recovered. The FTSE 100 had gone up by over 200% and the American S&P 500 had gone up by 400%.

Dotcom Bubble and Financial Crisis

But then there was more trouble. The Millennium Bug didn’t come to anything but the dotcom bubble burst. Share prices of technology companies had risen a lot in the late 1990s but then fell considerably.

Then UK share prices recovered again until the financial crisis of 2008 when they fell once more. From 2009 until coronavirus hit, the trend has been mainly upwards.

Coronavirus (COVID 19)

While the history lessons are interesting reflections, this doesn’t guarantee what will happen following the coronavirus (COVID 19) situation. Past performance cannot be used as a guide to future performance and should never be relied upon in this way.

This chart includes the ups and downs of the UK share market over the long term between 1975 and 2020 (Click the graph to see in more detail). 

Source: Datastream. MSCI UK £ used for Equity, FTSE Brit Govt All Stocks used for Bonds, UK Sterling 3M deposit used for Cash. Returns include total returns and assume dividends reinvested, Data to 28 February 2020.

Before investing…

Remember, investments can go down in value as well as up, so you could get back less than you put in. You should consider having at least 4 times your monthly essential outgoings saved in an instant access account should you need it for a rainy day, before you consider investing. That way you don’t have to rely on withdrawing investment funds for emergencies, particularly if that emergency could happen alongside a fall in the markets.

If you've already invested online through Royal Bank Invest, you can track the progress of your investment as and when you want with your online investment account.