Daily Investor Update 16 April

Posted by JSCFinancial on Friday 16th of April 2021.

With the vaccine rollout gathering pace and the roadmap set out for the easing of the current lockdown restrictions, there appears to be some light at the end of the tunnel. With this in mind, we hope you and your close ones are staying safe.

The coronavirus pandemic has caused significant volatility in global equity markets and we continue to see larger daily falls and gains than we would normally expect. With this in mind, it is really important that you think twice before taking any action over your pensions and investments.

The FTSE 100 index was up 0.6% yesterday (Thursday 15 April 2021) after key US companies reported strong earnings and fresh economic data pointed to a rebound in consumer spending and the jobs market.

Germany’s DAX 30 was up 0.3% and France’s CAC 40 was up 0.4%.

Naturally, the positive news from the United States saw their major equity markets perform strongly. The Dow Jones 30 rose 0.9% to a record close and marking the first time the Index has crossed the 34,000 level. The S&P 500 gained 1.1%, also reaching a record high. The Nasdaq was up 1.3%.

Technology shares rebounded as bond yields fell. The so-called FAANG stocks – Facebook, Amazon, Apple, Netflix and Alphabet – all rose more than 1%. The 10-year Treasury yield dropped 8 basis points below 1.56%.

Whatever you are invested in, we’d like to remind you about the following key principles.

Stay invested – as you have seen global equity markets fall and the value of your own investments fall as well, it is natural that some of you will be thinking whether you should sell your investments and move to cash or some other “safe haven”. Our strong message to you is stay invested, focus on the investment objective that you set with your Financial Adviser at outset and trust the process. History shows that as night follows day, global equity market recoveries follow global equity market falls and it is damaging to miss out on the recovery days. The following chart shows the performance of the FTSE All Share over the last 20 years, between 31 March 2001 and 31 March 2021, and the impact if you missed the 10 best days. The cost of missing these 10 best days would have been over 3% a year (Source: Omnis Investments).

Understand your attitude to risk – we know that you will have discussed your Attitude to Risk and your capacity for loss comprehensively with your Financial Adviser. We are delighted that this process appears to have really worked during this extremely short-term volatile period.

If you are a Cautious or Balanced investor, you have been protected from the extreme falls of global equity markets. In fact, if you look at the average of all Cautious funds in the market (using the IA sector – Mixed Investment 20% to 60% Shares), a typical Cautious investment will be up by between 6% and 7% since the start of 2020, compared to the FTSE 100 which has fallen by more than 3% (Source: FE Analytics as at close on 15 April 2021).

For Balanced (using the IA sector – Mixed Investment 40% to 85% Shares), a typical Balanced investment will be up by almost 11% since the start of 2020 (Source: FE Analytics as at close on 15 April 2021).

Diversify your investments – if you are invested in Openwork recommended investments in line with your Attitude to Risk like the Openwork Graphene Model Portfolios, Openwork Portfolio of Funds and Prudential PruFunds, your investment is diversifed which means it invests in a wide range of different asset classes.

Different types of investment (asset classes) and regions of the world all perform differently. Diversifying your investment by spreading it across many different asset classes and regions of the world means that, when certain segments aren’t performing as well, others in your portfolio are likely to be doing better and so will help protect the value of your overall investment.

Buying low – when you invest, you are always trying to buy low and sell high. For many, now may be a good time to consider increasing your investment. While trying to time a market bottom is difficult, history tells us that you do not have to wait long, if you invest slightly before the bottom, before your investment is back to its original value. As the chart below shows, investing 5% before the market bottom has, on average, added just 3 days to an investor's recovery period.

In such unprecedented times, it is important to know that your hard-earned pension savings and other investments are being looked after. The Openwork Investment Committee is monitoring your investment closely. While none of us can stop short-term market falls, we do fully expect global equity markets to recover. We cannot predict timescales but if you do not need your money now, we believe you will be rewarded for staying invested.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a reliable indicator of future performance and should not be relied upon.