Coronavirus: Things are going to be tough for investors, so reassess your risk
, Money editor
Saturday March 14 2020, 12.01am GMT, The Times
Some investors have lost a lot of money this week and that is hard to take. It seems very likely as well that you’re going to lose some more.
With every financial crisis there is a cost. There are sectors that will need government support, individual groups who will foot the bill more than others, and it is always, always the cash-strapped and indebted that suffer the most.
In this crisis, there will also be those who lose loved ones before their time. That makes this a stock market crash like no other.
Stock markets around the world have fallen — Wall St had its worst day since 1987
JEENAH MOON/GETTY IMAGES
All across the economy businesses and professional investors are reassessing risk, and that is what you need to do too.
Stock markets have been pricing in their judgment of the state of the global economy alongside the public health worries, and this has been reflected in its most brutal form in the fall in share prices. Trying to figure out what to do while they calculate losses has left some investors scrabbling to find blame. The problem is that there doesn’t seem to be any.
With the financial crisis you could pick your villain: there were bankers, an easy target; there were the feckless who lied about their incomes or borrowed beyond their means; and there were the policymakers and politicians who let cheap credit run unfettered. But this time there is no one to point the finger at, which makes dealing with the fallout harder to bear.
Banks have passed on this week’s Bank of England rate cut in full to borrowers in a rapid fashion, certainly quicker than I can ever remember, which suggests that they appreciate its political importance.
That some have cut savings rates too is really just understandable. That annuity rates have been slashed alongside the collapse in government gilt yields, is also just an economic certainty. Even the fact that insurers have stopped offering travel or wedding cover, or have stripped policies of cancellation cover altogether, is not something you can really be cross about. It is simply insurers acting as insurers do, weighing up the new liabilities and acting accordingly.
So how much exposure to all this can you stomach?
While those with no savings will need as much help as possible, it is the prudent, as so often, who may feel that they are taking the burden of the crisis through dwindling returns and interest on their money.
But there are an estimated 10 million British people who have no savings, a further 3 million who have less than £1,200, and around 9 million who regularly pay their bills from a credit card. Not being able to work for a couple of weeks may send their finances to the brink.
And what of the nation’s renters who may not be able to pay their bills. Don’t they need the equivalent of a mortgage holiday too?
This week on the markets was dreadful, and it could be prolonged. So you need to think about whether your finances will suffer not just a short-term shock, but also a longer term slowdown.
I can’t tell you how you should weigh up your own risks from this crisis: only you can do that. It will depend on how old you are, your outgoings, your appetite for exposure.
Selling now, however, really does just crystallise your losses, although I know that not bailing out is easier said than done.
Really if you’re a regular investor, try not to panic and keep going. If you’re looking for opportunities, it may well be that this black week will pose the best share-buying opportunity in a decade.
But make sure you’re doing so only once you have a full grasp of where the economy is headed. We’re not there yet.
Banking
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