March 2020 Market Update

Welcome to the March edition of your monthly market update. Through this update we keep you in the loop on on what happened in markets last month and what it means for you (and your money).

So, what happened in the markets last month?

• Escalating fears over the impact of the coronavirus on the global economy continued to influence investment markets.
• At the beginning of February, markets appeared to react positively to China’s central bank’s decision to inject $22 billion into the local market to stimulate growth. But, as news broke of the virus spreading to other countries, concern began to grow on the wider impact to supply chains and the global economy.
• At the end of the month, global financial markets had their worst week since 2008 as fears of a global economic slowdown grew.
• While coronavirus dominated this month’s major headlines, discussion over the U.K. and EU’s trade deal began towards the end of the month. As anticipated, initial conversations signalled a difference in opinions with negotiations set to continue until an agreement is in place before year end.

And how are investments performing?

• Investments took a hit globally this month with equity prices declining quickly in the last week of February, causing losses in the U.K. market of about 9.8% and around 6.6% across global markets as a whole.
• The strongest performer? The UK Gilt holding grew by 1.51%. Thanks to their safe haven status, investors purchased UK Government bonds in an effort to reduce risk and offset the falling equity markets.
• The weakest performer? The UK Equity holding fell by -9.23%. Equity markets across the globe were hit hard by the spread of the coronavirus. The UK market also felt the additional impact of challenging trade negotiations with the EU.

Lastly, what does all this mean for me and my money?

In the last week of the month, stock market prices dropped quickly over intensifying concerns about the coronavirus. It’s important to remember that this size of loss is actually pretty normal in any given year.

To put it into context, let’s take a look back at the end of 2018. U.K. markets fell by approximately 10% with global markets as a whole falling by around 14%. The drop was primarily driven by short-term fears over the escalation of the trade war between China and the U.S. at the time.

The important thing to remember is that there will always be something that impacts markets in the short-term whether that be a virus, a political situation or election results. But a smart investor knows to drown out the daily noise, stick to your plan and focus on what you can control. Because here’s the good news: while in the short-term it’s harder to know how much short-term volatility we should expect, the long-term has historically been much easier to predict.

That’s all for now but if you have any questions you can always reach out to support@wealthsimple.com or book a call with a member of our investment team here.

Take care,

James

Investment Adviser

Wealthsimple