Market Update


Despite some awful days’ trading already, 9 March has been the worst so far. It was horrendous. It is imperative to update you further on our thoughts at this stage.

The oil price collapse was the final straw, bringing oil stocks down as a consequence and not a few pence but big percentage figures like BP over 20%. It is not ‘just’ those fortunate enough to be investors too but people’s pensions, insurances and all connected things and it affects all forms of confidence – and that affects you whether you think you are ‘invested’ or not.

As well as the fears, the problem is that being confined to quarantine = no travel or work and so oil consumption has fallen and OPEC has been unable to agree a deal with Russia to cut production so the price collapsed overnight. The fact this ‘thing’ could be pretty-much over in say three months’ time is irrelevant in terms of the ‘now’. Texas Crude was already cheap enough at $43 but it fell to under $30 – the biggest one day drop since after the Gulf War. Fair value in my book is $70 a barrel.

Consequently, the Dow and all other markets plummeted, especially as energy stocks still make-up such large amounts of the indices. Tracker funds will have been hit harder than some active strategies as a consequence. We shall hope that governments and central banks will intervene decisively to draw a line under the current levels so some stability can return. 

Are there any bright spots on the markets? Very few indeed and who would want to own government bonds with minus yields or US Treasury bills at less than 0.5%? It hasn’t happened yet but a colossal day of reckoning will be there for bonds generally. Cash, currency and gold are worth a premium but these would never feature as main strategy elements for anyone in ‘normal’ conditions as they are poor substitutes for preferable investments then.

At the time of writing, the FTSE is at a level it first hit in March 1998 – twenty-two years ago. It hit 3,541 in March 2009 at the depths of the financial crisis and has since seen a new peak of 7,903 in May 2018.  Below 6,000, all things taken into consideration, is ludicrous at the moment, especially as the UK market never rose in line with say the US because of uncertainties over ‘Brexit’ of course.

Remember too that with savage sell-offs, some of the biggest ever daily increases have happened not long after. That is no guarantee this will happen again but the same forces which exaggerate declines work in reverse and those who have exited miss that imperative recovery.