Article written by Richard Cole, Fund Manager from Future Money LTD (4/12/2020)
With the Global Financial Crisis, Brexit and Covid-19, as a society we have experienced three “once in a lifetime” events in little more than a decade. Each of these created mass uncertainty for investors and times of severe stress in financial markets. The constant coverage of rolling news and a tendency for sensationalism in headlines means a market development can quickly become all-consuming when considering its impact on investment portfolios. The details of an event must be studied, but it is also important to consider how this fits into, and affects, the global picture and what opportunities might arise on the path ahead.
2020 will be remembered as the year that coronavirus ravaged the global economy with the heavy falls of February and March being the biggest stories in markets, yet despite this, Brexit is far from a forgotten factor in managing portfolios. As has been the case since the 2016 referendum, the question of the trading relationship between the UK and EU continues to be a major factor for investors. On the whole, market participants view a no-deal Brexit as damaging to the UK economy and currency markets are the clearest indication of this. Sterling fell heavily following the EU referendum in 2016 and has experienced further losses whenever a no-deal departure has seemed more likely, while progress towards a deal has sent the pound higher.
The movement of sterling will create winners and losers in markets, and these should be carefully considered, but for investors, this is not the only game in town. The rollout of Covid-19 vaccines is likely to be the biggest single factor affecting sentiment, while the White House transition from Trump to Biden has the potential to shift trends in both the US and worldwide. Political machinations and public health developments are at the heart of the current investment market instability. Predicting the exact outcomes will be extremely difficult and therefore investment portfolios should be carefully monitored, diversified and managed in collaboration with professional financial advice.