Last week was probably the toughest week experienced in stock markets since 1987 and this week is likely to result in further falls.
The fear that the Coronavirus could result in many people dying and many more being isolated has led to stockbrokers concluding that “business as usual”, at present, is either improbable or impossible.
Capitalism relies upon the supply of goods and services in one direction and payment for them in the other. This is now in question because human contact is being inhibited as it can result in someone passing on the virus.
The fear of the unknown dominates everyone’s thoughts.
Throw into the mix the Saudi/Russian disagreements over the flow and price of oil which has led to a fall in oil prices. This has reduced the profitability of oil companies, their share prices and simultaneously reduced the drive for renewable energy.
These events have resulted in stockbrokers, driven by fear, marking down the value of shares across the board without fear or favour and with absolutely no logic.
What is Warren Buffett’s opinion?
Buffett is regarded as the sage of investing. Well on 22nd February he reiterated what Jeremy Seigel said in his book “Stocks for the Long Run”, namely that he still expects “equities to be a much better long term choice for the individual”.
He also believes that “current low-interest rates will prevail over the coming decades” and if Corporate Tax rates remain near the current low levels it is “almost certain” that equities (shares) will outperform long term fixed rate debt instruments”.
So Buffett said in his 22nd February Newsletter, “If there is a stock market fall, hold on”
Your portfolio versus the FTSE
We have checked five of our most widely used funds and can confirm that, in every case, by being diversified from the FTSE 100 Index they have suffered lower falls in value.
What do we do now?
First of all, like it or not, the fall in share values has taken place so that horse has bolted. Thus, the answer is that we must sit tight and avoid, if possible, spending any part of our investments that have fallen in value because we will be drawing out our money at a discounted value.
What are we doing to help?
Given that an economic recovery is likely to extend well into 2021 and probably 2022, we will use this opportunity to reappraise all of the holdings in all of your funds to be as certain as we can that we are in the right place during the recovery.
Finally, please know we remain alert day by day and look forward to helping you.