The speed at which markets have fallen has left investors feeling depressed with the state of their portfolios. Even thinking about taking a look at your ISA or pension can bring on a sense of anxiety. You are not alone in feeling this way.

Coronavirus has had a fast and hard impact, meaning very few investors were prepared for how markets reacted. In such times of sadness and worry, it is important to remain level-headed and optimistic about a resolution.

Communities should come together to help people in need. Central banks are trying to keep the markets functioning, governments are doing their best to help businesses stay afloat and healthcare providers are doing their very best to help sick individuals.

It’s going to be a difficult few months ahead but hopefully the companies in which you’re invested will still be around at the end of the year and also in many years to come.

Markets have now offered the biggest discount in many fantastic companies for nearly a decade. It’s your chance to buy at 2012 prices. Indeed, many company directors are buying shares on price weakness, as we discuss in this article. 

Before you make any new investments, please consider your own personal circumstances. There seems a real risk that jobs could be lost as a result of coronavirus disruption. No-one should consider putting more money in the markets now if they have lots of debts to clear and/or don’t have a pile of cash to see them through emergencies.

Companies will need to have as much cash to hand as possible to see through the crisis and the same liquidity is also important for individuals. Dividends are likely to be pruned and share buybacks paused to help companies preserve cash. In a similar way, anyone worried about their job is going to cut back on their own spending.

Monday (16 March) saw a brutal sell-off in leisure companies including pubs company Marston’s (MARS) losing more than half its value in a single day. The idea that people are visiting pubs, gyms or restaurants less, and potentially not at all if the UK goes into more severe lockdown, has made investors panic about how earnings for these companies will be hit.

Marston’s is heavily indebted and, like many other stocks in its same situation, the shares have tanked for fear that it won’t be able to keep up debt repayments. In a normal situation it could sell more assets such as property to raise extra cash, but are there any willing buyers in this market?

It is certainly not a coincidence that many of the other big fallers on the UK stock market are companies drowning in debt, such as Cineworld (CINE) and Tullow Oil (TLW).

If you are in a position to put more money into stocks and funds then we suggest you avoid all companies that could face financial distress, as per our article in the 12 March issue. 

Earnings are going to be hit across multiple industries, thus creating a divide in the world of business. The weaker ones will fall by the wayside and the strongest ones will survive. Your goal as an investor is to be exposed to the latter camp.

‹ Previous2020-03-19Next ›