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The first 3 months have been an unprecedented start to 2020. January, saw Australia face an emergency with bushfires killing half a billion animals, while Iran/US tensions took to new levels and the United Kingdom formally withdrew from the EU.

February saw COVID-19 rock the global markets causing the Dow Jones Industrial average to plunge by 4.4%, its largest one-day decline in history. March has seen the outbreak of COVID-19 spread so vastly, that the western world is preparing for a shutdown in order to prevent further catastrophe. 

In a world controlled by media, we have to look at the raw facts to understand the scale of the problem. Year-to-date, the key figures for financial markets are: -

  • Dow Jones – 32.81% loss
  • S&P 500 – 28.46% loss
  • Euro Stoxx 50 – 31.96% loss
  • FTSE 100 – 31.75% loss
  • SSE (Shanghai) – 11.02% loss
  • Crude Oil – 52.98% loss

The global sell off has been seismic and how long it will continue for is an unknown, given the unprecedented nature of the situation. In times like this we turn to the history books as we try to comprehend how long this may continue for. Robert Toru Kiyosaki, the famous American author once said “the best way to predict the future is to study the past”.  So let’s consider the recovery times of some of the major historic stock market crashes (using the S&P 500 as a metric):-

  • 2007/08 debt crisis – 5 years to recover loss
  • 2000 Dot-com bubble – 7 years to recover loss
  • 1987 Black Monday – 4 years to recover loss

While we are concerned about the health of ourselves and loved ones, our financial health can often be overlooked. This can be detrimental to goals and targets that have been put in place previously.

With just over 306,500 cases and 13,036 deaths recorded globally, COVID-19 will continue to spread for the next 2- 3 months. So, while drastic measures are being taken to protect you and your family’s health, what measures have been taken to protect your wealth? And are drastic changes needed?

What options do we have in recouping this loss? The obvious option is to stay put and ride out the sharp decline. However, how do we know what the future looks like? Will it be a short-term recovery? Or is there more turmoil to come?

While we may not be able to agree on what the future will look like, we certainly can agree that the future holds a lot of uncertainty. Therefore, to prepare for this uncertainty, we must prepare with utmost reassurance and predictability. By doing so, we can find clarity during the most tested of times. 

It is of no surprise that many clients are now looking towards fixed returns to help salvage any losses that the unpredictability of COVID-19 has brought. The rational is simple; fixed returns during a time of inconsistency and insecurity.

At Berkeley, we are seeking buying opportunities for our asset purchases, as prices have been driven down through fears of global recession. Recapitalising assets has also been a key strategy for us as the Bank of England has reduced the base rate. However, our asset selection standards remain at the same diligent standards and are more important than ever in times of instability.