Investment volatility in action!

04 March 2020

You may know from our webpages that we often consider investment risk, volatility and clients' attitudes to investment risk and capacity for loss.

We feature on our website our Investment Risk Scale, which provides examples of past volatility in comparison with cautious, balanced and adventurous attitudes to investment risk, and we update our Investment House View on a regular basis to keep this relevant where we can to current economic conditions.

We have noted in our Investment House View that there have been future concerns on global growth, and indeed the potential for future global economic recession, and we believe that this is the issue that has been brought forward by the significant global spread of coronavirus, also known as COVID19.

As an example of volatility, over a recent 7-day period (and we appreciate this is only one index of many) we saw the US Dow Jones open on 25 February at approximately 28,037, fall to 24,706 points on Friday 28 February and close on Monday 02 March at 26,705 points. You can see from these index points that the fall amounted to approximately 12% and the subsequent rise of approximately 7.5/8% thus far. As you may expect, we will add a note at this point to confirm that fund values can fall as well as rise and are not guaranteed, adding that past performance is not a guarantee of future performance.

Looking at this further, it could be suggested in this index that the overall movement over the 7-day period (negative -12% and positive +8%) has been approximately 20%. That certainly is volatility in action, but not unheard of, with many press articles referring to the last recession of 2008 to identify similar index movements. 02 March 2020 saw the largest one day increase in the Dow Jones in its history, with the last similar increase occurring in December 2018.

The near future is a concern to most people, and central banks are focused on keeping economies running smoothly, although many of the tools that they could and do use are already in action and may have less impact. The last few days have given a good demonstration of how markets can react to evolving global events and, in some respects, may offer a challenge to an individual's view on their attitude to investment risk and their capacity for loss.

If you would like to review your pension, ISA and investment planning then please speak to the team at Chapters Financial soon.

No individual investment or financial advice is provided during the course of this blog.

Keith Churchouse FPFS


Chapters Financial Limited

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