Glass half full?

By FMB on 

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You might think it's hard to remain optimistic in the current climate, but it depends where you look.

I’ve been reading the financial news and blogs in recent weeks and wondering what our clients really need to know. What would be helpful right now? To be honest, I’m finding it quite hard to discover anything to report that you couldn’t work out for yourself…

“Trying to predict the precise outcome for the global economy is a fool’s errand”, according to Karen Ward and Tai Hui of J P Morgan Asset Management. They are tracking the infection rates across the globe, monitoring government economic interventions and reviewing market reactions. Their advice: “The clear investment implication is that, even more than usual, a well-diversified portfolio is essential. This includes diversification by region but also by asset class.” Who knew!?

Aviva Investors have a somewhat more sobering outlook based around three possible scenarios, broadly:

• Scenario A: The recovery begins in the second half of 2020
• Scenario B: The depth of the downturn is greater, but again recovery begins in the second half of 2020
• Scenario C: The depth is greater still and the recovery begins later

So bad, very bad or REALLY bad. I’m a glass half full kind of person so I like to look for the positive messages. I refuse to have the inner optimist bashed out of me!

I’m a reader of Moneyweek and I think its editor Merryn Somerset Webb is an excellent financial journalist. I find this publication an interesting and useful digest of the week’s financial news. She made a good point in last week’s edition, namely that the economic models used recently to predict the impact of Covid-19 on world markets were originally formulated by the US Congressional Budget Office after the SARS outbreak in 2003 and finalised in 2006. But technology has moved on significantly since then. Just how much of the economy can be kept alive by people working from home remains to be seen, but you would imagine it is more possible to remain economically active while working remotely than it was in 2003. I love her positivity!

Innes Ferre, market reporter at Yahoo! Finance reports on a bullish sentiment amongst some market analysts including Oppenheimer:

“The decline that we had from February to March, where we dropped 35% over a 20-day period, that was the bear market. Now we think we're entering a new bull market, that I think could continue through the balance of the year“, Ari Wald of Oppenheimer said.

Ferre also reports on the obvious opportunities in healthcare and tech stocks and no doubt fund managers will be taking advantage of this.

We have to remember that during periods of change, Darwinism applies more than ever, and businesses either adapt or die. Governments are doing their best to help those otherwise robust companies that are able to adapt, but too many companies were limping by in a weak position before Covid-19 and may not survive. But out of the ashes rises the phoenix! Well, I did say I was an optimist.

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