This is going to be a strange Easter. It’s normally a time of celebration for those with faith, a well-earned break for those of us still working and a period of holiday travel for families everywhere. All the parts that make up Easter are still there but nothing seems to be in the correct order at the moment.
Good Friday will still be here tomorrow but it will feel remarkably like any other current (not) normal day. We will return to work on Tuesday which will look the same as it did over the weekend. For our team the boundary between work and home has gone.
No self-respecting individual will be attending any gatherings. Garden centres will remain shut, no football derbies; beaches and parks all closed. Petrol is unbelievably cheap, but nobody is buying any. Even the DFS sale won’t be ending 5.00pm Bank Holiday Monday!
we are here
The chart below, taken from the FT shows the level of the FTSE 100 index from its low following the 2008 Great Financial Crisis. The market falls in the first quarter paused briefly at the December 2019 lows, then plummeted swiftly to the 2016 lows and continued all the way down to test the 2011 lows. In 32 years I have not witnessed anything like it. Thankfully support was found at this level as buyers finally arrived. A steady hovering around the 5000 level was hoped for and was duly delivered. A time to reflect and consolidate. Since then the markets have recovered back up to the 2016 lows and seem to be holding which leads to a much higher level of optimism. It’s important to discover just how deep something is before you jump in.
I hope not, but a fall of this size was never fixed in any market with a recovery as swift as the drop. It takes years to get market participants confidence back, and so recoveries usually take longer than the proceeding falls. Hence my reticence so far to deploy our cash and send in the big guns just yet.
playing the odds
The western world’s stock markets close today and do not reopen until Tuesday. Now, by Tuesday Boris could have made a full recovery, there could have been an “acceptable” level of deaths in New York and across the USA and here in Old Blighty London deaths and new cases could have peaked. That would hopefully take the markets higher again next Tuesday. We would all benefit because the bulk of our portfolios remain invested.
However the deaths are more likely to continue to accelerate in both the US and the UK across the regions, which typically have lagged behind the larger cities. We will hear many more personal stories of deaths over the long weekend too. The mood for investors could be very much worse by Tuesday than it is today.
I feel that it’s more prudent to commit to further investment once this period is over. We may miss a beneficial buying opportunity today, but I believe further such opportunities will present themselves in the short term. That’s the Easter teaser.
Fear of missing out. I do suffer from this behavioural bias as much as the next man. A few of my clients have been more confident than I could ever be making decisions for whole groups of clients. I have helped them to invest further amounts because they have assured me that they will certainly not need these funds in the medium term. That certainty can’t be assured for most of my clients. But of those who expressed an interest in investing more aggressively, I think we will be in a much better position to know after Easter.
Enjoy the weekend as best you can and stay safe.