That makes sense intuitively, because Amazon will survive Covid-19, while Virgin Atlantic may not.
A second spike in Covid-19 would not only shrink the economy, it would also send confidence to rock-bottom.
People would lose faith in the government, in the hopes for a vaccine, and in a quick return to normal. Equity markets aren’t pricing in much room for disappointment.
Is this a good time to invest?
This question has been coming in regularly since markets began falling but it’s the wrong question to be asking.
It shows a need for a long-term investment plan to keep you on track for the long term, making sure you meet your goals.
A well-designed one ignores short-term market movements because it is focused on the overall outcome, rather than the day-to-day ups and downs.
How will the crisis affect Brexit?
The crisis put Brexit into perspective. Loss of human life trumps trade deals – as it should.
Trade negotiations have slipped down the agenda for both sides – but as lockdowns end, normal course of business will be resumed.
There’s still a long way to go though and lots of questions remain unanswered, of which perhaps most pertinent still is the question of the border on the island of Ireland.
That’s nothing to do with the pandemic, and is still a problem without a solution.
What does this mean for income / dividends?
This year, dividends globally will be poor. Some companies are being asked not to pay dividends by governments, while others are taking the opportunity to conserve cash, so cancelling theirs as well.
UK companies have cut an estimated £30bn of dividend payments so far – and that’s based on earnings accumulated last year.
Next year, dividends are likely to be poor again. Even if the economic environment is more favourable, earnings will be lower – so there’ll be less to pay out.
Over time, normality will return. However, over the next couple of years any investment strategies that rely on dividends for income are going to face challenges – which is why we adopt a total return approach to managing money.
How will the world look post-Covid and how are we positioned for that?
Predictions about the future are easy to make.
Correct predictions about the future are a lot harder. We just don’t know what kind of future we’re talking about – there’s a big difference between a world with a vaccine and one where Covid-19 is still a threat.
When we don’t (or can’t) have a view on things, we return to our process.
