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With volatile stock markets should you be moving savings and pensions?

March 21st, 2020 10:05 PM

By Southern Star Team

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Tim Coffey from Coffey Financial Consulting in Clonakilty provides perspective and says it depends on your situation

THERE has been increased volatility in stock markets in recent weeks, but the fallout from Covid-19 really hit stock markets with a bang on Monday.

Coivd-19 fears, plus the fallout from a 30% fall in crude oil prices in two days meant global stock markets suffered their worst falls since 2008 that day. The S&P 500 fell 7.6% and the Eurostoxx 50 was down 8.4%.

The S&P 500 is now down close to 20% from its highs in mid-February. This is a pretty significant pull-back and nobody can say it won’t get worse before it will get better.

However, if you want to put these falls into context, the market is now back to where it was in June of 2019 having had a huge run of growth since the bottom of the last major crash in Spring of 2009.

This 11 year bull run in the markets had to come to an end at some stage and markets were probably due a correction of some form. Often the reasons for a correction can be something unforeseen that catches everyone off-guard and it is the uncertainty that can be the biggest short-term issue.

People are wondering what they should do now.

Firstly get advice and at least know how much of your pensions/investments are exposed to stock market falls.

Then it’s a question of are you comfortable with this amount being exposed to a risk of further falls and what is your timeframe for this investment?

Remember, if you’ve been investing for a number of years you’re still probably sitting on substantial gains.

But if you’re coming close to retirement or coming close to any stage in life where you need access to investment monies you really need to have a hard think about the downside-risk.

If infection continues to spread it’s difficult to see corporate earnings not being hit and there is a risk of global economies falling back into recession.

This will inevitably lead to further difficult times in markets. Markets will undoubtedly recover and move on in time, but you have to be able to wait for the recovery.

On the other side of the equation, any correction in equity markets also presents huge opportunity for investors who are brave enough to invest when the short-term sentiment is negative.

A sensible strategy here may be to phase into markets on a gradual basis and try to reduce your entry point risk.

There is no way of knowing the bottom of the markets, only with the benefit of hindsight.

So for now take advice on board, strap in and enjoy the ride.

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