Apr 14 2020

We’ve seen some encouraging news from the continent in the last week as Italy and Spain saw continued falls in new virus cases and deaths. Lockdown measures have also been eased in Spain, Austria and Czech Republic and Denmark and Norway’s schools and kindergartens are set to reopen on 15th and 20th April respectively.

Closer to home, our own lockdown is likely to be extended this week, although we have had several days of falling deaths and new cases.

The good news is that markets were overwhelmingly positive in the shortened Easter week, led by rallies in previously underperforming asset classes. The FTSE 250 rose by more than 16% compared to ‘just’ 7.88% for the FTSE 100 as the Pound gained against other major currencies. Having at one point been down more than 40% this year, the 250 has risen by nearly 28% in just over three weeks since the most recent bottom in March. Emerging markets ex-Asia also outperformed, with equity and currency markets in the likes of Brazil rising strongly on improved sentiment, albeit also from depressed levels.

Despite these and other equity markets booking large gains in recent weeks, they remain substantially below prior peaks. Further, should a history of bear market environments be anything to go by, we would expect the recent lows to be retested at some point and urge caution from those perhaps becoming a little complacent about the economic realities.

In a similar vein, the riskier areas of fixed income markets continued to rally, in particular high yield bonds which saw gains of more than 2.5% this week, following another buying program announcement from the US Federal Reserve. Having previously committed to only purchasing investment grade corporate bonds as part of its overarching rescue packages, the US central bank has now relaxed these rules to explicitly start accumulating ‘junk’ debt both through individual bond purchases and via ETFs.

Companies across the world will start to report their 2020 Q1 earnings this week. It’s quite possible that a lot of bad news is already ‘priced in’, though we expect many of the numbers to be dramatic. The tentative reopening of economies is positive news, but we remain vigilant for a re-emergence of virus cases, and elsewhere hope to see continued falls in numbers.

At Fairstone, our primary focus remains you and your financial objectives and as always, it is important that you stay focussed on your longer-term goals.

The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The views expressed in this publication represent those of the author and do not constitute financial advice.

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For further information, please contact:
Andrea Barker
/ Tel. +44 (0) 191 519 6243