Archive for March, 2020

Market Update 3: COVID-19

Posted on: March 23rd, 2020 by fwAdmin

Market Update 3: COVID-19

News of the spreading virus and the unprecedented response from governments around the world continues at a pace. What we are now witnessing is a simultaneous and voluntary shutdown of the global economy and this has unsurprisingly sent shockwaves through investment markets. There are two main aspects to the economic shock now unfolding. Firstly, there is the impact from labour shortages directly caused by sickness from the virus. The second factor relates to containment measures which effectively means social distancing and self-isolation which has a direct impact on supply and demand for individuals and corporates. There has also been a realisation that historic levels of stimulus will be required to support many sectors of the economy. The inability of economists/investment professionals to accurately predict the path of the crisis, means that it is very difficult for the market to find stability in asset prices. It is really the medical/scientific data which will guide the market direction from here and we would suggest that it will be the medical data which will ultimately lead the recovery in markets. On a positive note, it is worth noting the stabilizing picture emerging in China and South Korea in terms of virus containment. With this update I think it is worth breaking down some the factors that are in our minds as we navigate these uncertain times.

We have seen dramatic moves in markets in response to the situation. At the same time, a dispute between Russia and Saudi Arabia has led to a collapse in the oil price. Bonds and commodities have sold off providing less of an offset to equity allocations in recent days. This included gold where investors have moved from what is traditionally seen as a safe haven store of value to what is perceived as the ultimate form of liquidity, cash. Currency has also come into play. The US dollar has behaved in line with its safe-haven status with sterling falling to its lowest level against the dollar in decades. Some of these movements may be reflected in the underlying values of your portfolio, positive and negative, but our method of constructing portfolios puts heavy emphasis on diversification by asset class, geography (ultimately, this includes currency) and industry/sectors. This should help to insulate clients from some of the dramatic movements in individual assets, markets or currencies.

Our recent fund manager meetings indicate that they are not making rash decisions to overhaul portfolios with excessive trading and panic buying or selling. Whilst they expect the economic fallout from COVID 19 to be severe, they suggest that the broad market sell off has presented significant valuation movements in favoured areas of the market. Some are reducing their lower conviction holdings in order to raise cash and enable them to drip feed into new stock opportunities as they arise. We are given confidence by this cautious approach. Certain areas of the markets are undoubtably more directly impacted by the effects of the virus outbreak. For example, those companies with exposure to travel or hospitality. Active management should help to navigate this new investment landscape by focusing on company fundamentals, which may mean avoiding those companies with weaker financials and focusing on the more robust business models.

We give a lot of resource to our fund selection and the ongoing investment research process at Five Wealth. This is not only about the style of investment, philosophy and process. Whilst these factors are very important, we do also place weight on the fund manager, whether this is one or two individuals or a more collegiate approach and this is why we emphasise the vitalness of fund manager contact. In all cases, we have confidence in the expertise of these management teams, reflecting the depth of knowledge, skill and experience that has helped them navigate multiple economic and market shocks over the years.

I would reiterate that our central belief is that whilst it is difficult to see a swift resolution to this situation, we do believe that both markets and economies will ultimately recover. We will continue to review events as they unfold and will contact you if we believe any action is required in relation to your investment portfolio. In the meantime, if you have any concerns, please do contact your adviser to discuss this further.

Market Update 2: COVID-19 & Oil Prices

Posted on: March 9th, 2020 by fwAdmin

Market Update 2 – COVID-19 & Oil Prices

Given that it is more than a week ago that we first communicated about the coronavirus COVID-19 outbreak, we felt that it would be helpful to update clients on the most pertinent events during this time and summarise our thoughts on the continuing situation. Amidst a broad-based sell off in global equity markets, as investors have fled to assets of perceived lower risk, the US Federal Reserve made an emergency rate cut to counter fears of a major economic shock.

The Fed’s intervention did prompt a short-lived relief rally, but markets returned to negative sentiment in the face of the growing numbers of people infected with the virus across the world. Since the middle of February, the CBOE Volatility Index (or VIX) has seen a dramatic spike (see The VIX is an index representing the market’s expectations for volatility and is widely used to measure the level of risk, fear, or stress in the market. Whilst it will be very difficult to call the bottom of the market and there will likely be further drops, it is worth noting that the elevated VIX index is said by some to signal a buying opportunity.

The sectors hardest hit over the past couple of weeks included automobiles, oil services, industrials and mining, which would be directly impacted by disruption to trade supply and demand. The worst affected sector was travel and leisure, as a potential collapse in demand from consumers as well as the threat of imposed government restrictions on movement hang over these parts of the economy. Other areas of the market such as healthcare, utilities and pharmaceuticals have proved more resilient. The latest price shock has come from the oil sector, as the oil price plunged overnight on prospects of an aggressive price war. Alongside this, we have seen the FTSE 100 open significantly lower this morning, in the biggest intraday drop since the global financial crisis.

Conversely, government bonds have rallied over the same period, with yields hitting historic lows, as investors sought their relative safety. Likewise, gold continues to rally as investors rotate towards traditional safe haven assets.

All in all, what we are seeing is markets trying to “price in” the risk of a global recession, as leaders acknowledge that COVID-19 cannot now be contained and is likely to have a profound impact on global supply and demand for an undetermined period of time. The very nature of this crisis makes economic projections very difficult.

So, what does this mean for investors? Well, for clients of Five Wealth we would reiterate our previous message.


We can’t predict when the recovery will occur but are confident that it will happen. We do not try to time markets for our clients and would suggest that attempting to do so, has the potential to do more damage than good. We will continue to review events as they unfold and will contact you if we believe any action is required in relation to your investment portfolio. In the meantime, if you have any concerns, please do contact your adviser to discuss this further.

Manchester Legal Awards

Posted on: March 2nd, 2020 by fwAdmin

Five Wealth are excited to be sponsoring the Private Client Team of the Year award at the 2020 Manchester Legal Awards. We are pleased to once again be supporting the awards which honour the region’s top legal talent and skill.

Amy Grace, Liz Schulz, Susan Nelder, Rick Gosling and Jordan Wheatley will be attending the awards dinner on behalf of Five Wealth and we hope that they and their guests have a fantastic evening.

Good luck to the Private Client teams at Irwin Mitchell, Hugh Jones Solicitors, Linder Myers and Weightmans LLP who have been shortlisted for the team of the year award, and to all the other nominees.

We hope everyone enjoys what promises to be a great night!