James ConeyMar 12 2020

Keep calm and carry on investing

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In fact, perhaps my use of the word ‘remind’ is a little misleading.

For some people, the idea that the market could have anything other than a bull run may be news itself.

There was a funny cartoon in The Telegraph business section on March 2, with two traders joking that millennials had just learned that markets go down as well as up.

There is a truth to that — and there is a danger in it, too.

Without experience of what such movements mean, the lack of familiarity can lead to fear, and fear can lead to a market overreaction, or a ‘doom loop’ as those more nervous financial commentators are already dubbing it.

Coronavirus is not just a demand-side risk, of consumers failing to buy because they are in isolation, but of supply-side too.

The rhetoric of manufacturers warning that their supply chain has been disrupted should not be ignored.

It will not matter how much stimulus the Bank of England and Fed are willing to support the markets with; if parts are not getting to where they need to go, everything slows down.

One of the difficulties of this column is that it is several days between when I write it, and when you get to read it.

The coronavirus situation is changing so quickly that you really can not tell what is going to happen on the markets from one morning to the next, no matter one week.

The consensus, though, is very much that things will get worse before they will get better.

Of course, the UK matters, but it is the reaction in the US if there is an outbreak there, that will be the most telling.

Should some small US city have to go on lockdown, then I suspect the reaction on US corporates will be severe.

Not only that, it could damage President Donald Trump and play into the hands of the pro-national healthcare Bernie Sanders, but also shaking American blue chips that have been surging along under his presidency.

This will be a time for calm heads.

Fund managers have already been dipping in to the market to buy solid multinationals that have suffered a sell-off in China because they are exposed to the consumer: Diageo, Burberry and Nike, for example.

Others have been dipping into more traditional assets: gold and, in increasing numbers, silver.

But it can be very hard to convince savers to ride out a storm if they cannot remember the last time there was one. 

Regular saving, dividends and a long-term horizon are the key things to emphasise here.

Focus on the positives and try to emphasise the fact that times like these serve as a reminder as to why equity investing carries bigger returns, and that is because it does come with some risk.

That is a fact many savers will be learning for the first time.

Budget needs

It will have been 500 days since the last Budget when Rishi Sunak stands up and delivers his first as chancellor on March 11.

Speculating what this event will deliver has routinely proved pointless, but let’s hope for not too many surprises.

Financial planning is almost impossible to do when people keep moving the goalposts with the rules on pensions and investing.

When Philip Hammond joked he wanted to get rid of the turmoil of two Budgets a year, I am sure he never intended that we should go 18 months without one. 

For the first time in years, the UK really does need to have a Budget — particularly now we have a chancellor who could get something done.

Political skits

I’ve long been a fan of US TV show Saturday Night Live, which, thankfully, Sky has finally decided to put on UK television.

One of the current skits is of the current democratic candidates in the US, with the comedian Larry David doing a brilliant parody of Bernie Sanders.

While talking about coronavirus, he has Mr Sanders say how he does not trust anti-bacterial handwash: “It says it kills 99.99% of germs… but what about the top 0.01%. Why do these elite germs get away with it again?”

Such droll, gentle wit would have really helped to pop the illusions of the Corbynistas during our own election campaign.

James Coney is money editor of The Times and The Sunday Times