Managing Your Investments at a Time of Uncertainty
At a time when most of Europe is in lockdown, there is a clear level of uncertainty around the stocks and shares markets and how this uncertainty will affect investments. We delve into was to manage these uncertain times.
We would normally expect political, monetary issues or global conflict to impact on the markets, however, in truly unique circumstances, we are now having to assess the market response to the global COVID-19 pandemic.
In a surprise move, The Bank of England took the emergency step of reducing the Base Rate by 0.5% which bolstered market confidence and temporarily helped to steady values. Later in March, a further emergency rate cut reduced the UK base rate to 0.10%.
At a time when most of Europe is in lockdown, there is a clear level of uncertainty around the stocks and shares markets and how this uncertainty will affect investments.
Other factors to consider…
The Brexit impasse has partially been resolved, however, the difficulties of negotiating the practicalities of the separation remain. The pros and cons of Brexit will be debated well into the future but the markets responded positively to the re-election of a majority Conservative Government with a mandate to push forward with the Brexit process.
At the same time, more of a concern for the wider global economy had been the America First policy of the current administration that continued to cause the manufacturing powerhouse of China to apply the brakes to its economy. Prior to COVID-19, China’s slowdown, with seemingly no clear path for a resolution, was looking likely to force China to explore alternative sources to ease supply chains, if the US maintained its tough stance on import tariffs which are intended to make US goods more attractive. This could result in a reversal of Chinese monetary policy with further stimulus rather than debt reduction as had been envisaged, which could be positive for equity markets in the longer term.
What does this mean for my investments?
Whilst a reduction in the base rate is not normally reflected positively in people’s investment returns, Unity Mutual have taken the step of maintaining their interest rate, for their Lifetime ISA for example, at 1.5%.
Although the stocks and shares market fluctuates during times of uncertainty and the value of your fund can fall as well as rise, saving in the stock market is intended as a longer-term investment and whilst you could get back less than you paid in, the stock market tends to be cyclical and always recovers from drops, although it may take time to do so.
If you’re unsure what to do next, you may be best seeking some advice from an IFA. An adviser’s expertise should be in navigating situations like the one we’re in and, while there may be a charge, the peace of mind this brings carries value in itself.
Remember, by keeping calm and taking control you’ll be better placed to navigate today’s uncertainties. If you would like to discuss further details about your investment with Unity Mutual, you can contact our team and we will be more than happy to chat to you about things.
