During times of global crisis, we're highly likely to see significant market turbulence and indeed that's been happening. We've seen a 30% drop in the FTSE100 and similar falls around the world. However, it's also highly likely that markets will rebound very quickly if any perceived good news is received. Yesterday saw such a rebound.
The perceived good news yesterday was:
- The UK has now moved into lockdown, which will have the benefit of significantly slowing the spread of COVID-19 and will reduce the pressure on the NHS and hopefully get things back to normal quicker.
- The number of new infections in Italy has slowed for three days running. This suggests that the measures taken there are starting to have a positive effect
- The American Government has reached agreement on a coronavirus bailout plan for a sum of $2 trillion, which will be used to protect businesses and fund hospitals throughout this crisis. We were subjected to the normal political grandstanding of US politicians but an agreement is here nonetheless
As a result, yesterday we saw a positive reaction from markets :
The FTSE 100 rose by 9.04%
The S&P 500 rose by 9.38%
The Dow Jones rose by 11.37% (its highest ever rise in one day!)
We're a long way from being on top of this virus and the economic consequences will last even longer, however, the investment markets are forward-looking and given the historic low valuations in the market and virtually zero interest rates, small positives can make a huge difference to the market perception and cause large rises in short periods of time. This is why we've been advising clients to hold their nerve in the short term. No doubt, there's more volatility to come but we've at least seen what can happen.
As soon as we know more, we’ll provide you with an update. For more information, visit our COVID-19 Information Hub.