Your Q2 2020 outlook

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Each quarter, we speak to Trevor Greetham, Royal London’s Head of Multi Asset Investments, to find out what’s been going on in the global economy and how this could have an impact on your money.

“We’ve seen significant swings in global financial markets over the past few weeks due to continuing fear surrounding the coronavirus. The FTSE 100 has fallen by nearly 30% in a month, and we expect this market uncertainty to continue in the short term. Financial markets across the globe are very volatile as the situation continues to unfold, and it’s difficult to predict how the pandemic will play out over coming months.

“Our government has stepped in to help the economy with various measures and the Bank of England has cut interest rates to below 0.25%. The US Federal Reserve has also slashed rates and implemented other significant policies to help their economy. These measures and interventions, from governments and central banks, around the world can help to support the economy and markets during periods of stress.

“It’s possible that you’ll have seen markets fall sharply recently, and we’d expect them to be quite volatile over the coming weeks. It’s important to remember that your pension savings are long-term investments. It’s very normal for the value of investments to go up and down. Although not guaranteed, the hope and expectation is that values generally go up over the longer term, despite short-term volatility.

“Making decisions based on what’s happening in the short term can be a risky thing to do. If you're thinking about making any decisions related to your pension or other investments, it’s a good idea to speak to a financial adviser before taking any action.

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What are our investment teams doing?

“Over the long run there’s a recession every five to ten years. We think of these cycles in terms of waves of growth and inflation, and consider which investments do best when growth is strong or weak, and when inflation is falling or rising. Our investment experts analyse and understand where we are in that cycle and which types of investments we should be investing in within the portfolio mix. This is called ‘active tactical asset allocation’.

“Falling markets can offer buying opportunities, particularly when you’re planning to invest for a long time. Our multi asset portfolios are currently holding slightly more than a neutral position in equities, with the ability to buy more if markets regain more confidence. We’re also holding more government bonds as they give the portfolios greater stability.

“We believe that investing in a wide range of asset classes will result in more consistent performance across a wide range of economic conditions. This spread of different investments helps to reduce the risk of having all your eggs in one basket.”

This information was correct at the time of writing in March 2020.

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