The coronavirus outbreak is piling pressure on financial markets around the globe.
But how is it affecting the health of your personal investments and how can you keep them safe?
The FTSE 100 – which measures the performance of the biggest companies in the UK – closed almost 1% higher last Friday (20 March) at 5,191 points, than the previous trading day on Thursday.
It came after Chancellor Rishi Sunak announced an unprecedented package of measures to protect wages, self-employed workers and benefit claimants.
However, on 20 February, the FTSE 100 index stood at around 7,436 points, meaning there has been a drop of around a third since then.
The FTSE 100 has fallen faster than after the global financial crisis more than a decade ago, and much faster than after previous shocks. Widespread reporting suggests a global recession could be on the cards. Further drops seem inevitable as concerns about the economic impact of coronavirus in the UK and the wider world are growing.
Should I be concerned about my savings in the long term?
The short answer is no.
While the coronavirus will likely continue to rattle markets, this doesn’t necessarily mean long-term investors should be overly concerned. This is because volatility in the stock markets is normal and markets often rebound quickly once immediate issues are resolved. The world always carries uncertainty and there is enough of it about. The trouble is that [stock] markets generally trend upwards over the longer term, even though it’s not unusual for them to fall by 10% over a short time.
The FTSE 100, for example, has regularly fallen by 10% since 1990, although it’s relatively rare for it to fall by more than 20%. Its important for investors not to panic. Anyone investing in the stock market should be thinking in terms of five years or more, rather than weeks or months, and that is the context through which to view the current turbulence.
Furthermore, the Chancellor announced a series of measures to protect the economy amid the coronavirus outbreak in the Budget on 11 March. But it’s important to bear in mind that it isn’t clear how much of a positive impact this will have. Tom McGillycuddy, Tickr founder, says: ‘Unless the UK and US government embark on a big fiscal program, like in some of the Nordic countries, we are in for multiple quarters of retraction. ‘But, with some big fiscal intervention and proper short term hardcore social distancing, we could bounce out of the downturn much quicker.