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Global Stock Market update: what in the world is happening?

Jonathon Curtis, Investment Analyst, looks at how the coronavirus pandemic has impacted stock markets across the globe, and what we think investors should consider in these turbulent times.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Not so long ago all many UK investors were talking about was Brexit. But there’s a new topic in town, and this one makes our withdrawal from the EU seem like a mere trifle. Of course I’m talking about the coronavirus. While Brexit worries had a big impact on the UK stock market, COVID-19 is making waves in stock markets all around the world.

Since the start of the market tumbles on 20 February, the global stock market has tumbled more than 25%, bringing the longest bull-market in history to a screeching halt. Many investors have been anticipating its end for many years, but virtually no-one could have predicted it would be caused by a pandemic.

This article is not personal advice so if you’re not sure if an investment is right for you, please seek advice. All investments fall as well as rise in value, so you could get back less than you invest. Past performance should not be seen as a guide to the future.

Why have markets fallen so much?

Stock markets reflect investors’ expectations of companies’ future earnings, profits and cash flows. So when investors are collectively optimistic about company prospects, the stock market goes up. When they become nervous, expecting slower or even negative growth, the stock market falls. And when there’s widespread panic, they can crash.

The outbreak has caused mass alarm, and government quarantine measures are expected to hurt lots of businesses. Travel and leisure companies are the obvious candidates, but the knock-on effect could see businesses across many industries impacted. Some companies could actually benefit, such as providers of remote-working technology, food retailers and cleaning products, but these are in the minority.

It’s not all about coronavirus though. Oil is also playing a part in the recent volatility. Saudi Arabia has sparked an oil price war with Russia, causing oil prices to plunge last week. This puts pressure on the big energy companies that make up so much of the global stock markets.

Where has been hit hardest?

No major stock market has escaped the recent turbulence. Since the falls began on 20 February 2020, the FTSE World index has fallen 25.8%*. Not all stock markets have fared equally as bad though and it should be remembered this is only over a short period.

Perhaps ironically, given it’s where the virus outbreak began, China has held up better than all the other major markets. It’s fallen 12.2% over the same period. Japan hasn’t been as badly affected either, losing 17.7%. Both countries were quick to put in place sweeping quarantine measures and travel restrictions, which seem to have generally halted the virus’ spread there. Expectations for growth in the Chinese and Japanese stock markets were also lower than for other markets before the outbreak, which has also lessened the impact for the East Asian nations.

Global stock market performance since 20 February

Past performance isn’t a guide to the future. Source: Lipper IM *to 16/3/2020.

Western hemisphere markets have felt the full force of the pandemic. Parts of Europe, such as Italy, have been badly affect by COVID-19, leading to a 27.5% fall in the European stock market. The US has also fared worse than the broader global market, losing 26.1%, despite so far having fewer cases of the virus. Expectations for growth of American companies were higher than much of the rest of the world before the outbreak. Now those expectations are unlikely to be met, the impact has been significant.

The worst performing market so far though has been the UK. It’s dropped 30.9%, meaning it’s given back all its post-Brexit gains and more. A big part of that is down to the companies that dominate the FTSE All Share index, such as oil and gas companies, banks and miners, being among the worst performers during the turbulence.

Industry performance since 20 February 2020

Past performance isn’t a guide to the future. Source: Lipper IM *to 16/3/2020.

What should investors consider?

It’s never nice to see the value of your investments go down, especially by as much as many may have done over the past month. Although the scale of these falls hasn’t been seen in over thirty years, investors should remember investing in the stock-market is never a sure thing. There’s always a chance you could get back less than you invest, and there will almost certainly be volatility along the way.

That’s why we think, if you’re comfortable investing in the stock market, you should make sure your investment portfolio matches your attitude to risk. If you’ve found recent volatility too much to bear, you could consider diversifying into other asset classes that aren’t usually as volatile or have tended to perform differently to the stock market over time, such as bonds, property or gold.

You should also make sure you’ve got plenty of diversification, so you’re never ‘betting the ranch’ on a particular area or investment style. Investing in things that perform differently in different market conditions means not everything in your portfolio will do well at the same time, but could provide more balance to your returns.

Some investors may be tempted to sell everything to avoid further losses and wait for the markets to recover before investing again. In practice though this is very difficult to do, and could result in worse returns than if you’d just stayed invested. There’s no signal when we reach the bottom of the market. They can recover quickly, meaning you could miss out on the gains of a potential market rally.

Whatever you decide to do, we think taking a long-term view is the most important thing. There have been market crashes throughout history – many worse than this one has so far been. Over time the market has recovered though.

Of course there are no guarantees and there’s no telling when or how long a recovery will take. It could be weeks, months or years and it could fall further. By staying invested for the long-term, you’re more likely to improve your returns over time. It should also help you see through whatever the future holds in store.

Wealth 50 review

Funds in the Wealth 50’s global sector are a mixed bag of styles and investment aims. Some target long-term returns by investing in high-quality growing companies. Others focus more on delivering a healthy income. And some invest in unloved companies the managers expect to return to favour. That’s why we wouldn’t expect them all to do well at the same time.

Let’s look at how the Wealth 50’s actively-managed global sector funds have fared so far through the recent volatility.

Rathbone Global Opportunities

James Thomson’s investments in large, high-quality companies he expects to keep growing over the long term have held up relatively well. In the 12 months to 16 March 2020 the fund has lost 4.2% compared with the FTSE World’s 10.8% fall. Past performance isn’t a guide to future returns.

Thomson doesn’t have any investments in airlines, oil & gas, banks or mining companies, which have suffered more than most. His 60% exposure to the US has also helped as the dollar has strengthened, but his technology holdings have been hit hard.

Thomson thinks we’re headed for a global recession, but also that massive government and central bank stimulus will lead to a supercharged recovery. He sees now as a historic buying opportunity, and is acting fast so he doesn’t miss out.

Annual percentage growth
March 15 -
March 16
March 16 -
March 17
March 17 -
March 18
March 18 -
March 19
March 19 -
March 20
Rathbone Global Opportunities 7.0% 29.7% 16.1% 5.2% -4.2%
FTSE World 0.0% 35.2% 4.9% 5.0% -10.8%

Past performance isn’t a guide to the future. Source: *Lipper IM to 16/3/2020

More on Rathbone Global Opportunities, including charges

Rathbone Global Opportunities Key Investor Information

Jupiter Global Value Equity

Ben Whitmore and Dermot Murphy invest in companies with healthy finances that they think have temporarily fallen out-of-favour, making their shares attractively priced. Their ‘value’ investing style has been out of favour for several years though, and has fared worse than the broader global stock market more recently.

The maxim ‘the-higher-they-climb-the harder-they-fall’ hasn’t held true over the past 12 months. Lowly-valued companies have provided no defence against market volatility as investors have preferred highly-valued companies with momentum on their side. Whitmore and Murphy remain convinced though that history is on their side and over the longer-term their portfolio of attractively-price companies with strong balance sheets will deliver good returns.

Annual percentage growth
March 15 -
March 16
March 16 -
March 17
March 17 -
March 18
March 18 -
March 19
March 19 -
March 20
Jupiter Global Value Equity N/A N/A N/A N/A -23.6%
FTSE All World -0.5% 35.5% 5.3% 4.5% -10.6%

Past performance isn’t a guide to the future. Source: *Lipper IM to 16/3/2020

N/A - Full year performance data before this date is unavailable.

More on Jupiter Global Value Equity, including charges

Jupiter Global Value Equity Key Investor Information

BNY Mellon Global Income

Nick Clay looks for companies offering higher yields than the global stock market average. He’s a fairly conservative investor, so the fund can fall behind rapidly rising markets but usually does better in falling ones.

That’s been the case recently. The fund has lost less than half as much as its global benchmark over the past 12 months*. There’s no guarantee what future performance will look like though.

Utility and health care companies have done well for the fund. Clay usually takes profit from his best performers by selling them. He’s looking for new ideas for the portfolio, and considering investing more in existing ones that haven’t done so well.

Annual percentage growth
March 15 -
March 16
March 16 -
March 17
March 17 -
March 18
March 18 -
March 19
March 19 -
March 20
BNY Mellon Global Income 13.9% 27.2% -1.3% 9.5% -5.1%
FTSE All World -0.5% 35.5% 5.3% 4.5% -10.6%

Past performance isn’t a guide to the future. Source: *Lipper IM to 16/3/2020

More on BNY Mellon Global Income, including charges

BNY Mellon Global Income Key Investor Information

Artemis Global Income

Jacob de Tusch-Lec runs this fund differently to many others in the global income space. He’s not afraid to invest in companies others see as too small or too risky. That increases the potential for capital growth but it also makes the fund more volatile than many of his peers.

Performance has been poor over the past 12 months*, losing more than twice what the benchmark has, and made worse by falling more than the market during the recent declines. De Tusch-Lec’s contrarian investment style means he often invests in companies whose share price has fallen. That hasn’t worked well recently though as the market has favoured momentum-based approaches.

This is a short time over which to judge performance though. We expect the manager to do better over the long-term in the future, although there are no guarantees.

Annual percentage growth
March 15 -
March 16
March 16 -
March 17
March 17 -
March 18
March 18 -
March 19
March 19 -
March 20
Artemis Global Income -2.0% 33.5% -1.7% -5.6% -24.4%
FTSE All World -0.5% 35.5% 5.3% 4.5% -10.6%

Past performance isn’t a guide to the future. Source: *Lipper IM to 16/3/2020

More on Artemis Global Income, including charges

Artemis Global Income Key Investor Information

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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