No, there won’t be a new world order
Earlier today, we held our latest investment committee (virtually, via a group Zoom call!) to discuss how our approach might change as the world continues to recover from the global coronavirus pandemic.
We work at Informed Choice with a third-party provider of investment research, which helps inform our decisions around asset allocations at different risk levels.
However, the buck stops with us.
Our in-house investment committee, which I chair, consists of our Financial Planners and Paraplanners, getting together regularly to discuss the outlook for investments and how we apply this outlook within the models we recommend for our clients.
It was an interesting investment committee meeting this morning.
With the world gradually coming out of the Covid-19 crisis, we had a lot to cover, including whether or not the economic response to the pandemic represents a ‘new world order’.
We don’t believe it does.
While the economic shock associated with the coronavirus is significant, and the most serious implications could be yet to come, the fundamentals which support our asset allocation models remain sound.
We reflected on how well the portfolios we recommend to our clients at Informed Choice have weathered the recent economic and market storm.
Looking at portfolio performance over the past 12 months, the majority of our clients remain in positive territory, with the most aggressive risk levels only marginally down in this time.
The combination of diversification using mainstream asset classes and considered fund selection to populate models has done its job.
We know things are bad for the UK and global economies. They could get much worse, as businesses come off the drug of government-backed financial support and attempt to restore previous trading levels.
That said, the fiscal and monetary response to the crisis has been exceptional.
We will all be repaying this debt for many years to come, through higher taxation and lower public spending.
And when the next economic crisis hits, the required response (lower or negative interest rates, quantitative easing and so-called helicopter money) will likely be even greater.
But the fundamental principles that drive our investment recommendations remain sound.
We agreed at our investment committee meeting this morning to retain the existing benchmark allocations and fund selections, reviewing these again next quarter.
We also discussed the merits and disadvantages of resuming portfolio rebalancing, with the risks of extreme market volatility still present.
Looking at the VIX (Fear) index, this remains well above historic levels, suggesting the markets expect volatility to continue for now.
This volatility picture should become clearer in the coming weeks and months, as global businesses resume their ordinary trading patterns.
As ever, please do speak to your Financial Planner at Informed Choice with any questions you have about our approach to investment advice.