Fidelity Investment
update " how to respond to the worst market fall since 1987 "
these are worrying times
Yet, it's important to keep level-headed when faced with a financial crisis
In such situations, it's often useful to look back, when trying to make sense of the future
Markets do, and will, recover
In the meantime, here are our thoughts and some practical suggestions for investors
after a fall in the stock market that was only exceeded in the fabled crashes of 1929 and 1987 this comes 3rd
A few months ago many of us believed that the most important drivers of the market where the FED reserve three interest rate cuts last summer and the easing in trade sanctions between China and the US
That seems like ancient history now
the fact is that the coronavirus and the Saudi suicidal oil price war are genuine 'black swan' events , unpredictable and devasting for impact
the sell-off does not not reflect a rational assessment of the increased likelihood of a Global recession - this was all about pain/capitulation
is a recession more likely because of the coronavirus and the hard measures to counter this disease ?
Absolutely - Yes
the only question about this fall in the markets is: how long will it be and how deep will it go
But ths downturn is different from the post-crisis recession
Supply and demand have been hit badly, but neither has been permanently destroyed
the economy will bounce back, perhaps quickly ( 3rd quarter - 2nd half of the year)
has this sell-off created buying opportunities , as suggested yesterday by our fund managers ?
Undoubtedly - in the hardest hit sectors , such as travel, lesure and retail and here the question is no whether these shares are too cheap or not, because in many cases they are, with one significant caveat : If companies survive, those who do will recover strongly - high risk sector for now - stay out, or limited exposure
I this the end of the post-crisis bull market ?
technically yes, this sharp fall ( more than 20% basis FTSE ) draws a line under that long rally
More importantly , this is a watershed for markets because for the first time since 2009 investors are hesitant to respond to more monetary stimilus
The next phase of market growth will not be fuelled by central Banks but must be find a new source of energy - fiscal stimulus leading to genuine economic growth
what should investors do now ?
selling after a fall makes the pain go away but still crystallises a loss
Remember , unless you abandon the stock market completely , you will have to buy back in at some point
if you wait untill you feel better about investing , that moment will be way too late to benefit from the recovery that will come
so we suggest keep investing through the cycle , don try to catch the bottom, scale down buying will give a good average to build positions at depressed level which in the long run, we believe will serve you well
enclosed the FTSE 100 LT chart
the 1987 crash ?, .... it look like an innocuous bump in the road today
In time, the coronavirus crash may look the same
Fidelity select 50 balanced Fund.