Coronavirus Market Insight: Update 27th March 2020

27 March, 2020 | News

As we come to the end of the first week of the government’s ‘stay at home’ policy, the markets have again provided rough terrain for investors.

 

This week we have seen the risk associated with trying to time markets. On Tuesday 24th March the FTSE100 posted a 9% gain; highlighting just how volatile markets are currently and how sensitive investors’ returns can be if they are trying to time markets. This was the highest day gain for the index for more than 10 years.

 

Over the course of the week the FTSE100 currently stands around 7% higher than opening last Monday. Although this does not mean the recovery is necessarily underway, it serves some comfort to investors who felt there was only one direction markets could currently move.

 

For a recovery to begin, markets need to find the bottom. For markets to find the bottom we are going to need more clarity as to the timeline and severity of disruption to businesses. Until that point markets will be priced on the worst-case scenario that investors can see, especially during this unprecedented time. This week has shown this to be the case, as markets acted positively to news, such as, the financial stimulus package announced by the US and the UK government showing they are willing to do what it takes to control the spread of the virus and provide financial support to ensure businesses are able to get back to work as soon as possible.

 

We do, however, have more unknowns which will still cause high levels of volatility as more comes to light. The government just don’t know how many people have had or do have the virus. The UK government are working on this as a priority, as they are now testing antibody tests to see if they are a viable means of checking if someone has already had the virus. This is as well as looking to significantly increase the number of tests to see who has the virus. If or when this happens, they will have a far better understanding as to the infection and illness rate caused by the virus and therefore, the expected strain on the health service. This will allow the government to ensure the right measures are taken at the right time and allow them to lift trade restrictions at the right time.

 

This work will clearly come behind ensuring the immediate risk to public health and in the meantime, the government will have to stick with a hard stance on minimising the spread of infection through their current, or any further social distancing measures.

 

As always, we are still here, still working and happy to take any queries you may have.

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