July 27, 2020

Investment in the time of Coronavirus

After a turbulent opening to 2020, how do we prepare for a new reality and navigate a clear route for investment strategy moving forward?

As we began 2020, our investment clients were in the main pretty cautiously positioned – since the financial crisis of 2007/08 markets had moved steadily upwards, bar the odd hiccup along the way. Valuations were looking increasingly stretched and it only seemed a matter of time before a correction would occur.

At that time no one could have predicted that a global pandemic would be the cause of a crisis. And by the end of the first quarter the spread of the virus had resulted in dramatic falls in equity and property markets around the globe.

Central banks and governments around the world immediately reacted and have provided unprecedented quantities of financial support and stimulus, trying to stop the global economy tipping into a depression. So far the input appears to have worked – stock markets have rallied and in many instances valuations now sit above the levels of this time last year.

“our view from Fife is to tread carefully”

However, our view from Fife is to tread carefully. At current levels we think valuations have got ahead of themselves and do not adequately discount the impact of the recession the world has now entered. The impacts of this pandemic will be felt long into the next year and perhaps beyond.

Huge amounts of capital are being raised to refinance businesses damaged by the crisis, unemployment rates are destined to keep rising throughout most of the remainder of this year and many businesses will not survive. Markets will therefore remain volatile until it is clear that the virus has been mastered and we can all move positively forward.

Our conservative approach to asset allocation and deployment of funds, and emphasis on quality has stood most of our clients in good stead during this period.

A brave new world in upon us, one that requires planning for a new normal. We can’t control the pandemic but we can certainly control our response to it. For us, we have confidence we can see an end to this crisis and when that time comes we will start to deploy funds again. For the moment we remain cautious – this is the time for investment in planning, discipline and thoughtfulness to control the path ahead.