As we enter the fifth week of ‘lockdown’ caused by the Coronavirus (Covid-19) crisis, we thought it important to update you with a little of the information available to us through our various professional bodies.
As I’m sure you will appreciate, it is extremely difficult to assess the likely timescale for the current situation but it does appear that, for the time being at least, markets have stabilised somewhat.
The over-arching view from commentators at the moment appears to support the view that although the downturn has been remarkably steep in nature, it will hopefully be followed by a relatively speedy recovery.
Of course, the further quantitative easing (QE) measures announced by central banks around the world and in particular the financial assistance to businesses in the United Kingdom via the employee furlough scheme have helped enormously. Some will argue that the ‘cure’ may be worse than the ‘disease’ from a monetary standpoint. Will this much needed assistance lead to a further period of financial austerity measures for example?
Only time will tell regarding these points! Further fiscal ‘belt-tightening’ in the future would go against this government’s stated aim but these policies were outlined in December 2019, well before the current crisis emerged. It is possible central banks will simply buy government debt (QE) to make capital available to the economy and then not release these bonds back to the market for re-sale in the future. Effectively, this is ‘printing money’ and can lead to inflationary pressures within an economy if done regularly, but as a one-off measure this inflationary outcome is unlikely.
So, there is much to ponder but, amongst all of this ‘noise’ our message remains unchanged. Stay the course! The vital factor in investment success is ‘time in the market’ not timing the market. Many of the largest single day recoveries occur within two weeks of the largest single day declines. Judging the timing of those occasions is virtually impossible and so we should not try. When you were younger and your mum used to say ‘patience is a virtue’ – she was as ever, correct!
The Vanguard LifeStrategy funds (when compared to their peers) continue to hold their value very well indeed. In the three-month period to 17th April 2020, the 40% Equity Fund showed losses of 5.13% compared to the sector average loss of 11.12%. The 60% Equity Fund has shown a loss of 8.79% compared to the sector average of 13.49% over the same period. In fact, looking back over the last 12 months, the 40% Equity Fund is still showing an overall gain of 2.54% with the 60% Equity fund showing a slight loss of 0.41%.
These figures we feel, clearly demonstrate the value of a heavily diversified investment portfolio and give valuable evidence as to why Lifetime continues to believe Vanguard LifeStrategy Funds provide good potential for future positive returns.
Of course, if you have any issues you need to be addressed from a personal financial viewpoint then please contact your adviser directly who will be glad to provide any assistance required.
Rupert Smith – Director (Chair of Investment Committee – Lifetime)
- Rupert’s previous report, entitled Lifetime’s case for Vanguard LifeStrategy, can be read here: