The last month has not been business as usual in the world. From an economic point of view there has been mass disruption and loss of revenue across most industries globally due to the continued spread of COVID-19. As a result, we experienced some pretty significant swings in the market, making it one of the worst periods for equities since 2008.
As always through this update, we’ll aim to give you a snapshot view of what’s happening, how investments are performing and what this all means for you.
So, what happened in the markets last month?
- In March we continued to see the coronavirus spread across the world, causing sharp falls in stock markets as a global economic recession became a reality.
- In response, governments globally passed large deficit spending initiatives and aggressively used monetary policy to support people and businesses through this pause in economic activity.
- Similarly, central banks around the world lowered interest rates to historic lows and introduced monetary stimulation measures to maintain liquidity in the economy. The Bank of England reduced rates to 0.10% mid-month.
- Newly released numbers showed that the U.K. economy had seen no significant economic growth since January. The information came before Chancellor Rishi Sunak rolled out a new U.K. Budget on 11th March.
And how are investments performing?
Equities experienced one of their worst quarters globally, with the FTSE All Share declining by 24%. This is an understandable response to the news: the outlook for growth and corporate profits declined significantly. Government bonds, in contrast, rose in value as interest rates declined due to the negative growth outlook (rates move inversely with prices).
This month, given the deep swings in the market, we wanted to give you a transparent look at how our portfolios have performed. Using an independent third party we benchmarked our Conservative, Balanced and Growth portfolio against other investment management services in the U.K. to see how they did comparatively. We also always include this measurement in our quarterly Performance Guide.
The table below shows performance from 1st March to 31st March. Within the month, equity markets across the globe fell over -25% from top to bottom.
|Risk Level||Wealthsimple performance||Peer group performance||Difference|
Lastly, what does all this mean for me and my money?
This was a challenging quarter for all of us — in our lives and in the markets. At Wealthsimple, our portfolios performed as anticipated in a significant downturn, with diversifying assets cushioning the losses from the large declines in equity price. That’s not to say it’s easy to look at the numbers in your portfolio right now. It’s not, and we get how hard it is.
So, what does this mean for your portfolio and what should you be doing? Very little. We still expect equities to provide attractive returns over time. If your income thankfully hasn’t been disrupted, the best thing you can do right now is to continue your direct debits and contributing regularly to your saving, investment and pension accounts. When markets are down, your expected future returns on new contributions go up (a fancy way of saying: you’re buying low).
If your income has been disrupted, we’re sincerely sorry to hear. The first thing to do is look into your options through government relief packages here. Then prioritise reducing expenditure and only dipping into your emergency fund or savings for basic necessities.