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Holly's Blog: Bears, germs and dead cats

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Yesterday the FTSE100 fell by 10% after Trump gave the most expensive speech in history, causing panic in global markets. This bloodbath came despite the reassuring stance of our rather smooth new Chancellor in Wednesday’s Budget, a few hours after the Bank of England cut interest rates to 0.25%. In the last month, the FTSE 100 has fallen by nearly 30%.

 

Stock market facts

Let’s think about how bad this is with a quick history lesson.

  • A bear market happens when things fall by more than 20% from the highs
  • This time it took just 19 days for the US stock market to go from record highs to entering a bear market – that’s fast
  • This speed has only been beaten once during the Great Depression in 1931 when it took just 15 days to go from highs to the jaws of the bear
  • Yesterday’s falls were the biggest one day fall we’ve seen since 1987

Stock markets do not like uncertainty – fear has taken over here as a system which runs on Maths and equations doesn’t know what numbers to put into the formulae.

 

Reasons to be cheerful

  • I’ve tried hard to find something to feel more positive about.
  • The FTSE is simply on sale – yesterday, Unilever was about 20% cheaper than it was a month ago – but people are still using Dove soap, scoffing Magnums and trying to relax with Radox (although it could be messy if the 3 activities are combined)
  • The FTSE has recovered by over 4% today as I write– although this will be labelled a “dead cat bounce” by many - to Mog’s disgust, this is a rather ‘cat-ist’ way of describing a temporary resurgence amidst a longer-term downwards path
  • Ummmm….running out of reasons here…..This time 10 years ago I was in labour and I’m not today……
  • Errr – it’s Friday?

 

“Oh but this time it’s different”

Said every teenager to their parents after their first love goes wrong. Said every investor watching their ISAs and pensions plummet. “No but this time it’s different.” Except it generally isn’t.

We have little idea of how this pandemic will play out and the miserable brigade are out in force. It’s hard. I’m trying to work out how to keep my 15 staff happy, well and productive. How to run a business remotely. Deal with clients. Absorb the lost short-term revenues. How I’m going to cope if they shut the schools. (Nightmare!!!!) I’m worried about my family. Am I going to have to cancel my Easter holiday? Do I have enough loo roll and pasta? You know. All the important stuff. And that’s just little old me. But the world is made up of billions of people like me who all have similar questions. It’s the lack of certainty and the lack of the solid toolkits to inform our planning which is so tough and creating so much unease.

BUT. And here it comes folks – the BUT. There is absolutely no point in running around like a blue-@rsed fly, panic-selling because it’s ‘Armageddon’. My friend asked me a few days ago if she should sell all her ISAs and investments. No!

Unless you believe that it’s the end of capitalism as we know it, there is no reason that solid companies like Unilever, Coca-Cola, Samsung or Apple should cost 20% less this week than they did last week. So I sit tight. And I keep calm and carry on. Because there will always be people who say that “this time it’s different”. But I don’t believe that it is. The markets have been over-sold and the markets will come back. Full stop.

 

What do you think?

We really want to know what you think. What is the mood amongst retail investors? What are you planning? I would be so grateful if you would complete our short survey, compiled for people with boredom thresholds as low as mine. Will take less than 3 minutes. It really helps us to understand the climate better – and we’ll report back next week and on social media.

Keep your nerve folks. Wash your hands. Lose your online trading passwords. And make sure there is enough wine in the fridge.

Holly

We'd love to know how you're thinking

What is the mood among retail investors? What are you planning? We would be so grateful if you would complete our short survey, 3-minute survey to understand the climate better. We’ll report back next week.

Take our 3-minute survey

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Comments

Holly - Boring Money
Sorry about the slow reply. It’s been a bit mad! The best advice I think I was ever given (for a long-term savings pot of money -I’m talking stuff you can set aside for at least 10 years here ) was simply to invest as much as you can , as often as you can. Drip feeding in avoids buying at the highest point. (Not much risk of that at the moment!) It also imposes discipline – that direct debit means you don’t have to remember to action this every month and it just ticks away in the background. Markets are hugely volatile and the FTSE is like a yo-yo. This morning it has been up 3% and down 2% in the last 2 hours alone. No-one can time these markets. You win some and you lose some. One month you might buy in just before things slide. Another month you might buy in the day before things jump. But we tend to look at this in the short-term and not over a longer timeframe, which isn’t always helpful. The fact remains that the FTSE is over 30% cheaper today than it was about a month ago. If you were going to buy something long-term like a Le Creuset pan (to use a very middle class analogy!) would you buy it in November at full price? Or in the Boxing Day sale? Cash is limp right now. Safe. But limp. This is not a time to change from shares to cash if you have a long-term timeframe for these savings. If you need the money in a years’ time, for example, then it’s a very different story. If you are worried about your job security for example then do make sure that you have enough of a cash buffer for this. It’s generally very sensible to have 6 months’ salary in cash, to protect you when things go pear-shaped. This is a general view, I’m not allowed to make personalised recommendations, I’m not a financial adviser and I don’t know your circumstances like other debt, your timeframes, your employment status or your broader scenario etc. But in general – for long-term savers – now is not the time to cancel that direct debit. Keep calm and carry on. That’s what I’m doing… as spooky as it is. Holly - Boring Money
17/03/2020 11:04:22
1 0
Andrew Jackson
Holly, in the current COVID-19 turmoil would you still advocate making ongoing regular investments in stocks and shares ISAs or pensions, or is better saving to cash.
15/03/2020 15:53:25
1 0

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