Brokers Ireland today advised those invested in the stock market to hold tight through the Covid-19 epidemic, to avoid cashing- in at a low point and to take advice, because the market will recover.
Rachel McGovern, Director of Financial Services at the organisation, which represents 1,250 Broker firms, said that while infections continue to increase, the market is likely to see downward pressure, along with moments of positivity. However, some analysts believe the worst is already priced in.
“Investors who are saving for the longer term, for example for retirement, should stay invested through the current COVID-19 market drops. This will pass and cashing in now would mean realising the losses,” she said.
She said looking back at the history of the market should give comfort as to the likely future scenario. “Whilst market returns can be dramatically unpredictable in the short term, the range of returns from market-based investments tends to be considerably more predictable over longer periods of time.
“In the last recession, markets dropped by approximately 53 per cent. However, they recovered and the US stock market recovered in 1,529 days (over four years) following the 2008 financial crisis. On foot of recent price action many investments look to be very good value. Admittedly, some sectors will have a challenging earnings season ahead. Some, on the other hand, are doing quite well as a result of the disruption.”
Ms McGovern said the S&P 500, a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States, has seen a one-month drop calculated at 29.18 per cent from mid-February to mid-March 2020. “However, despite the very sharp decline, prices are only back to February 2017 levels. There has been a bull market since March 2009.”
She said that the last three recessions – 2007, 2001 and 1987 – were caused by financial crises.We have never experienced a recession caused by a pandemic and it is quite plausible that if there is to be a recession that it will be ‘v-shaped’, with a sharp decline and an equally sharp recovery.
Ms McGovern said that stock market investment for most consumers is intended to deliver in the long-term rather than the short-term. “And in this regard, history teaches us a positive lesson. At the moment and indeed in the recent past those consumers who are looking at longer-term investments have been gradually buying, not selling.”
“However each investment is different and we would recommend that consumers seek advice on their own particular circumstances from a Financial Broker,” she said.