Following a 30% fall since mid-February, it was not surprising that the FTSE 100 index would start to attract speculative buyers even as the news about the economic impact of Covid-19 deteriorated. By any measure, many stocks are the cheapest they’ve been since the Great Financial Crisis of 2008. Of course, it is also true that several FTSE companies have already cut or cancelled their dividends to preserve cash. That was to be expected and we are sure there will be more. Nevertheless, stocks appeared to find a level this week and traded in a range of 4,990 to 5,150 while still reacting to every piece of news. The financial support being put up by governments and central banks is staggering and, for now, seems to be giving some support to markets and, to some extent, underwriting risk for company boards and investors alike.
On the other hand, the weekly US payroll data showed 3.3 million new people filing for unemployment. This rate of job losses is several times higher than previous crises that have hit the US economy but, of course, this is due to the nature of the pandemic which has affected everyone all at once rather than a slowly developing recession.
Today, Friday, markets retreated ahead of the weekend. This is understandable since short term investors, of which there are many right now, are reluctant to carry positions over the weekend due to the fast moving situation and the risk of further bad news emerging while markets are shut.
The FACET investment team has been watching the markets continuously all week. We recognise some clear opportunities now where we believe the balance between reward and risk is starting to look justifiable. We will of course keep you updated with any strategic investment decisions we may make and will be happy to answer any questions you may have.
DISCLAIMER: The views, opinions and expectations expressed in this newsletter are those of members of FACET Investment Management and do not constitute investment advice nor taken as an offer or recommendation to invest in any of the products referred to. We do not guarantee the suitability or performance of any assets mentioned and past performance is not necessarily a guide to future performance. FACET Investment Management Limited is authorised and regulated by the Financial Conduct Authority. FRN: 131372.