We wanted to outline once again the consistent SYS message of maintaining a balanced diversified portfolio in light of the recent public markets pullback brought about by; (i) the spread of Coronavirus, (ii) the oil price shock, and (iii) elevated worries about global economic prospects, and the possibility of more benign growth going forward as a result.
The magnitude of recent falls might appear steep to some, especially when read through the lens of the financial press, but digging deeper, the moves have been more or less in line with the annual high-lows that have been seen over the past forty years.
This chart/table outlines the impact of previous epidemics. As one can see, in most instances markets were trading in positive territory some six months after the initial onset.
Irish property has also been impacted, with a number of funds moving to a “disposal basis” pricing model which has shaved their values by approx 7-9%. However, we saw the same in the financial crisis, and when stock markets did settle, normal pricing was resumed, with investors that held on reaping the benefits. Our view on such funds remains broadly positive with the likes of the Irish commercial property funds remaining well positioned, (low vacancy rate ) with the funds delivering an average of 5.1% return for investors through 2019.
A number of other assets have also continued to perform strongly, notably Government Bonds and Gold. Further, Global banks have responded quickly, with the US Federal Reserve and the Bank of England both cutting interest rates over recent days, and the likelihood of further coordinated fiscal stimulus in the months ahead.
Regarding Coronavirus, the BBC also reports that there are a number of vaccines being tested currently, with human trials set to begin later this year.
The best way to capture longer term returns is to sit tight during market declines, and this is borne out by a JP Morgan 2019 report which looked back over the twenty year period from the 1st of January 1999 through to 31st December 2018. If you were out of the market during the ten best performing days, your returns would have been cut in half!
We can’t outguess the market, but we know that equity markets reward those who are prepared to invest for the longer term. So we say focus on what you can control with SYS Group as your trusted partner;
(i) Aim for a diverse portfolio which will help mitigate risk
(ii) Have the correct structures in place in terms of tax and inheritance planning
(iii) Try to not let emotion drive your decision making!
Thank you once again for your continued support.
CEO SYS Group
SYS Financial Planners is Regulated By The Central Bank Of Ireland