Market update

February 2020

Coronavirus

The World Health Organisation now thinks that the virus could reach ‘pandemic’ levels. This means that the virus might begin spreading easily from person to person in many parts of the world. They are urging countries to prepare for this – which could involve trade suspension, border closures, and lots more quarantining. Aside from the threat to human health, this could also mean that the global economy slows down as less work gets done and less money is spent. For example, Apple have already warned that the coronavirus might cause iPhone shortages.

Brexit, Brexit, Brexit

As of 11pm on the 31st January, the United Kingdom were no longer members of the EU and so began the transition period. We’ve not really felt any huge impact yet, and it’s early days to comment on how the next stage of the negotiations will progress. There’s still lots of uncertainty for us to deal with. Headlines have focussed on the potential (or lack of) for trade deals; the proposed points-based migration system; and the upcoming introduction of blue passports.

Trump, Trump, Trump

Over in the US the focus remains on the president. The impeachment trial ended in Trump being acquitted, which ended the threat that he would be removed from office. For now. Of course, the next focus is on the US presidential elections, and we are now going through the Democratic candidate campaigns. The outcome of that could have a big impact on how likely it is that Trump will be re-elected. We’re expecting Trump to be on his best behaviour for a while, which should be good for US markets in general.

Our view

We’re expecting investments to go up and down quite a lot in the near future – particularly as the extent of the impact of the coronavirus on the world economy becomes clearer. This means there might be some opportunity to take advantage of overreactions in the markets, but this needs to be balanced against managing the risks.

Investing with us

Our key goal is to deliver good outcomes for our customers. We do this by following our core beliefs:

Pensions are long term investments

While it can be hard to watch large market drops, especially if the value of your savings is falling, it’s important to remember that investing for retirement is a long term game. It’s very normal for an economy to go through phases of expansion and contraction.

In fact, over the long run there is 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 the short term view and we do this on a day to day basis so that we can try to maximise returns and avoid some of the losses.

Falling markets can be buying opportunities, particularly when you are planning to invest for a long time period. We see the current market falls as potential buying opportunities for equities. The multi asset portfolios are currently holding slightly more equities than average, having bought on the recent dips. We’re also holding more corporate and high yield bonds.

Greater diversification

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.

The Governed Portfolios are designed for investors who are saving into a pension and aim to maximise returns above inflation within a defined risk framework and term to retirement.

The Governed Retirement Income Portfolios (GRIPs) are designed for customers who are taking money out of their pension on a regular basis and aim to maximise returns above inflation to support sustainable, regular income withdrawals for a range of risk profiles. The portfolios hold a wide range of investments, including company shares, property, bonds, commodities and cash in order to help them meet their objectives.

Governance

We believe that all investment options should be monitored on a regular basis, and this is a core part of what we do for our customers. All the portfolios are monitored on an ongoing basis by our experts to ensure they deliver in line with their objectives. You can keep an eye on how your investments are performing using our online service.

If you are in any doubt about the suitability of any particular type of investment, you should seek professional financial advice. Advisers may charge for providing such advice and should confirm any costs beforehand.

For more information please speak to your financial adviser.

Read our previous market updates