Winners and losers in the virus crisis

Winners and losers in the virus crisis

Investors who piled their cash into gold at the start of 2020 would have seen the best returns throughout the coronavirus crisis, according to research which shows the defensive metal has returned 12 per cent since January 1.

Data from peer-to-peer lender RateSetter confirmed riskier investments — such as equities — have not fared well since the start of the year while traditionally stable assets such as UK government bonds have managed to protect investors' cash.

Corporate bonds and emerging market funds would have also seen a drop in value, the data showed.

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To produce the comparison, RateSetter looked at how a £10,000 investment would have performed in each of the assets from January 1 to April 18.

Source: RateSetter

Some £10,000 in gold would have grown to £11,773 while a UK government bond would have provided a £400-boost for the investor.

Meanwhile FTSE 100 stocks would have lost £2,522, emerging markets funds would have seen £1,643 knocked from the total, and corporate bonds would be down £70.

Ben Yearsley, investment consultant at Fairview Investing, said: “So far 2020 has shown the benefit of diversification within portfolios. 

“While not a great believer in government debt at these low levels, the performance this year has shown that it still performs in times of extreme stress. Diversity isn’t just about having different investments — it’s about having investments that perform in different ways and in response to different external events.”

Jason Hollands, managing director at Tilney, said it was “unsurprising” gold and government bonds had held up well during a period of turbulence for risk assets, as they played their “usual role” as “perceived safe haven assets”.

He added: “The question for advisers is where do we go from here? Despite a very gloomy economic outlook for 2020, the wall of liquidity and new cash being created is very constructive for risk assets and equities in particular. 

“It is hard not to see the scope for equity markets being materially higher by the end of 2021, while the headroom for returns on government bonds is extremely limited given crushingly low yields.”

Adrian Lowcock, head of personal investing at Willis Owen, said the key at this stage in the crisis was not to react to what had already happened but what might happen going forward.

He said: “Markets have sold off and rallied again during the lockdown phase, but we are only at the end of the beginning.

“The crisis is likely to have lingering effects initially on company profits, bond yields and interest rates offered on cash but also longer-term it will affect inflation and economic growth.”

Mr Lowcock added that trying to predict every possible outcome and get the timing right was a “near impossible feat”, so urged investors to diversify to spread the risk and reduce the likelihood of avoiding big losses.

He also thought cash played an important role during volatile markets as it was the “one thing” everyone wanted as it gave investors choice.

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