Your Q3 2020 outlook

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There are lots of decisions we have to make when it comes to investing your money, from understanding how much risk you want to take and working out what investments to put your money into, to designing strategies so we can get you the best possible returns. The economic cycle and market conditions are really important when it comes to making these decisions, because they can affect how your investments perform, so we always play close attention to what’s going on.

To keep you updated, 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.

This video was recorded in lockdown in June 2020 during the coronavirus outbreak.

How has coronavirus and the current economic situation impacted investments?

CAPTION: The coronavirus outbreak has been a major shock to the global economy and financial markets over the past few months… but what should we expect during the next quarter?

TREVOR GREETHAM: Hello, my name’s Trevor Greetham and I’m Head of Multi Assets for Royal London, and I’m going to speak to you for the next couple of minutes about the way we see the outlook for the economy and financial markets in this highly unusual time.

We’ve clearly had a major shock to the UK and world economy from the coronavirus, and the Government actions to lock economies down to stop the transmission of the virus caused a really dramatic collapse in economic activity. So in the UK, since the beginning of the year we’ve lost about one quarter of the economic activity for the entire county, which is bigger than any recession we’ve ever seen. The good news is things are starting to come back to life again as virus numbers are coming down, and that’s resulting in better economic numbers and a better stock market.

Now for the stock market as a whole it’s been a very difficult time. We had a crash in prices in March, as people started to realise the enormity of what was going on, and then we’ve had a very big bounce back in financial markets, which has taken some people by surprise. This is partly because Governments have really stepped in. Massive interest rate cuts, money printing, things like the furlough scheme in the UK to support the economy to keep people’s incomes going during the period where they can’t be working.

Where you go from here gets a bit more difficult. So we’ve had the big drop, we’ve had the big bounce back. We’ve now got a tug of war between this very loose and supported Government policy, the fact that the economies are starting to come back to life, and the fact that the virus is still out there. At the moment in the UK, estimates from the Office for National Statistics suggest that in London maybe 20% of us have antibodies. In the country as a whole it’s only something like 7%. And so we could see further outbreaks and further difficulties along the way. Not just in this country but around the world. Numbers are coming down very nicely in continental Europe, but they’re rising very rapidly in Brazil, and America hasn’t really got things under control before they started to reopen their economy again.

You’ve got lots of difficult things to weigh up. We think that could result in some further volatility in the markets. Our multi asset funds are positioned overweight global high yield bonds, where central banks are providing extra support. We’re underweight things like commercial property, which is challenged by people deferring rents or perhaps change of use of offices – I’m in my home office at the moment, I’m sure many of you are as well. So there could be some challenges to commercial property. We’re tilted in their exposure towards Asia, which has dealt with the virus much better, and the US where you’ve got the technology stocks, which are doing really well. We’re underweight UK equities. So we’re making some changes in the portfolio to reflect this time and we’re trying to be flexible about what happens next.

Longer term, though, I want people to be optimistic because we will beat the virus. In the next year or so it will start to disappear and people will have immunity, or there will be a vaccine. So at some point you’re going to get a proper economic recovery, with Government support if anything left in for longer than it needs to be just to be on the safe side. And that’s generally quite good for stock markets and financial markets. So the longer term outlook I think is pretty positive at the moment. Spreading your investments across different asset classes helps to smooth out some of the bumps, and in the meantime we’re managing the portfolios as best we can to take account of things as they change.

Thanks for listening and we will update you again in the situation three months’ from now and I’m sure there will be plenty to talk about. Thank you.

Coronavirus information and support

If you've been affected by coronavirus, we've pulled together lots of useful information to help support you to manage your finances and wellbeing during this challenging time.

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