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As we all continue to adapt to profound changes in our daily lives, it is a relief to see an element of calm return to global financial markets. Share prices remain well below the levels of only 8 weeks ago, but markets have rebounded from their lows over the past few weeks. Hopefully this rally can be sustained, but in view of the fact that coronavirus remains rampant in many parts of the world, and threatens to become so in other areas, it would be foolish to think the worst is already behind us.

Some of the economic forecasts being made are pretty scary. For example, the Office for Budget Responsibility (OBR) predicted this week that the UK economy could contract by 35% over the second quarter. Thankfully, they also indicated that they expected the economy to bounce back strongly once lockdown conditions end. That seems to be a common theme at the moment; that the economic shock could be far greater than anything we have seen before, but that it will only be temporary. The recent actions of Governments and Central Banks support this optimistic viewpoint, however we still don’t know how long the health crisis will last and therefore there is a risk of that optimism proving misplaced.

The strength of the recent rebound in share prices vindicates our general advice to sit tight throughout the current crisis. Over the past 3 weeks the FTSE All Share Index has risen by around 15%, whereas on Wall Street, the main indices have rebounded by around 30%! Whilst these rises are very welcome, it is not certain that this positive momentum will be maintained. Nevertheless, the mini-recovery illustrates how quickly markets can move upwards and why it is therefore important for long term investors to remain invested and not risk missing out on any further rises.

We remain hopeful that when life returns to “normal”, the global economy will quickly recover and this will be reflected in the valuations of client portfolios. Unfortunately, with no clear exit strategy for ending lockdown in the UK and elsewhere, we cannot say when that will be. It is also important to acknowledge that we are not out of the woods yet, despite confident predictions from President Trump that the US has “passed the peak”. Even if lockdown restrictions are lifted as a result of falling infections, the number of infections could rise again, resulting in a second lockdown. Therefore it is entirely possible that markets might fall further from current levels.

We will continue to monitor developments closely and provide further Market Updates on a regular basis throughout the crisis. We would also like to remind clients that Vintage is still fully operational and therefore if any client wishes to discuss the impact of the current crisis on their investments, please do not hesitate to contact us through the normal channels.

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This post was written by The Vintage Team