Are we there yet?

There will be no trumpet fanfare or bell ringing to signal it’s now safe to come out. Nobody will wave a starting flag if past market corrections are anything to go off, that officially commences the rally. Slowly the good news will start to be seen amongst all of the bad news. Imperceptibly attitudes will change and business as usual will return, along with the investment markets commencing their gradual recovery.

Our 30% market falls were sudden and indiscriminate. It’s often said that market gains take the stairs up, but the lift down. Actually to be precise “markets take the escalator up but the elevator down”. The difference matters as we start to see the first glimmers of a slowdown in deaths and new cases in Italy, but new cases are doubling daily in New York. As I always say, markets are moved by what the Americans think rather than what we think and right now it looks like the deaths in America will exceed everywhere else on the planet combined. There are just so many older and at risk individuals who live there and healthcare isn’t free.

jaws

I remember seeing Jaws as a kid. I saw it at the cinema. When the dead body became visible through the bite hole in the submerged boat, the whole cinema jumped and screamed. We had already been whipped in to a frenzy with the music, the merest glimpses of the dorsal fin and the blood. We wanted to look away but just had to carry on watching.

I don’t remember Jaws 2 or Jaws 3D and I can’t remember if there was a Jaws 4 or not. The aftershocks in the stock market will be like the sequels, they will gather some attention but nothing like the first epic.

Once we had seen the mechanical monster we lost most of our fear and then just looked forward to part where it died in the end. I hope I haven’t spoiled it for anyone who hasn’t seen it.

lights camera action

It’s now time to start the re-organisation, the rotation out of the shares which will remain dead in the water for some time. These are the shares which will undoubtedly recover and could be re-invested in further along this recovery. But right now my assumption is that nobody will be rushing to buy them, driving the price up, except for those with a 5 year plus time horizon. I’m sure that my clients like myself would prefer to see our portfolios climb back in a much shorter timeframe.

Today you will have been notified of our initial portfolio changes, not much by any means, but nobody has any idea when to start, no “markets OK” signal has been sent. So forget making one lot of changes at the bottom because we won’t be able to see that bottom until the recovery is well on it’s way.

we can forget anything linked to venues for the summer

Forget holidays, forget major purchases, forget social events. Forget going to the cinema or the pub (JD Wetherspoon) or the restaurant or the national park. Forget young people going out and girls buying their new outfits on-line on a Wednesday for a party on Saturday (ASOS). We have compiled our hit list of shares to sell and shares to buy. We will rotate by selling most individual shares on the day they rise a little and buy our new holdings once the funds have cleared and the markets suffer further setbacks. Gradually we will be ready to participate in the recovery, once the Americans have passed through their panic moment. Already the Far East has begun to stabilise.

what we all can do today

Most importantly be the editor of your own news feed. Don’t get sucked into what somebody thinks on Twitter or Facebook. On those channels anybody can say anything without a strand of proof. My advice is unfriend everyone but family and really close friends.

If you don’t like horror films but can’t help watching them, learn to look away. I have always encouraged clients to check into their on-line valuations, but if you are now logging on everyday it just won’t help you.

If your income or withdrawal plans have changed then please let us know by email. We have seen our investments fall quickly but only now are we slowly realising that it is going to be pretty impossible to spend any of our savings at all on discretionary items. I have heard of many clients that have had holidays cancelled and deposits refunded. For three weeks at least we are probably only going to be spending only on the essentials in life.

Done hesitate to get in contact if fear is over-taking you.

we are here

The pandemic doesn’t need to be “fixed” for the markets to recover. It looks like the FTSE 100 had now found a base at around 5000 points. It’s what I have been waiting for. It fluctuates on a daily basis, but seems to settle within a couple of hundred points either side. Right now as I write it’s about 5200 points. Markets are always looking 18 months forward and have already fully priced in a recession. Recessions vary in length as do recoveries. Event driven recessions like this are much shorter lived than structural recessions like 2008 when the entire global banking system was broken. We should have seen a rise in portfolio values by the end of the year.

I’m rushing this blog out, please forgive any typos but do tell me so I can correct them. Stay out of harms way.