Now is a good time for investors with cash to drip money back into the market for the long term
UK and European markets up by around 5% at open
- The UK and European markets have opened up by around 5% amid the vast amount of government and central bank
- Rishi Sunak expected to announce another rescue package aimed at supporting companies to retain staff instead of making layoffs
- For investors with cash in the side lines, now may be a good time to start dripping money back into the markets for the long term
In comparison to recent weeks, we saw some relative calm on the markets yesterday and this flowed through to overnight markets in Asia. The UK and European markets have opened up by around 5% amid the vast amounts of support that central banks and governments around the world are providing to their respective economies. The Bank of England’s rate cut to an unprecedented low of 0.1% and another £200bn of bond purchases have helped and there is an expectation that Rishi Sunak will announce another rescue package aimed at supporting companies to retain staff instead of making layoffs.
There is the inevitable hit to the economy and likely recession to come along but most important for the subsequent recovery is that people are in jobs and unemployment does not get out of hand. Monetary policy, which is a rather blunt instrument, is not likely to solve these acute issues on its own and will always work better with targeted policies such as those likely to be announced by the Chancellor.
Judging by the trading activity and the news flow this week, including two days in a row of no new cases in China, I believe the markets are trying to establish an interim bottom. The rush to the US dollar has eased with sterling gaining over 3% this morning. This leg of the severe downside moves may be coming to an end and volatility indices may have peaked but this does not mean we have reached an ultimate bottom of this coronavirus crisis. We still have to find out in the coming weeks and months whether stimulus and support measures will have been enough to stave off more than just a short and sharp recession. However, for investors with cash in the side lines, we believe now may be a good time to start dripping money back into the markets for the long term.
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