Liquidate entire portfolio until virus is over?

Kendall80

Theres a good reuters summary of that Imperial study. Apparently, we couldve been looking at 1/2 mill dead here and 2 mill in the US.

I tried linking here but it didnt work.

Alexland

It will hopefully get to a point where the market drops deccelerate as the most affected companies will have already devalued to become a smaller proportion of the remaining market.

But without government bailouts from printed money its hard to see how otherwise good companies can continue trading through this.

During the credit crunch the governments took a stake in the banks but this time it seems a bit unfair to dilute the affected company shareholders when the situation is a result of government policy to throttle the outbreak to align to health service capacity.

Inflation seems the most likely outcome.

worldtraveller

I'm certain that we'll see the Bank of England introducing a new quantitative easing programme (ie. extend current £435 billion) very soon, in a similar way to that which the Fed introduced on Sunday.

enthusiasticsaver

EdGasketTheSecond said:

Is anyone else contemplating or have ever liquidated all their shareholdings and stayed in cash (or some other non-equity investment) while markets have crashed? I am thinking that this is probably only the beginning of a protracted bear market and we could see values drop by a third from here.

I haven't read the full thread but surely if you liquidate you solidify all losses?  It also means presumably if someone is considering that they are invested above their risk profile?  Ours has lost around 10% so far and will probably go lower and that is on medium risk. The assumption being that when things get back to normal they will recover. We normally withdraw an amount each year from the portfolio but will probably avoid that this year unless there is a drastic improvement in Q3 and Q4.  Luckily we have enough liquid assets not to need to draw on it. 

Malthusian

ForestBluebells said:

I for one am very worried as I’m in an at risk group. Given the likelihood this will have long term impacts with many businesses closures and job losses, are we now thinking it is best to not invest and keep cash in an easy access savings account until we start to get through this in however long in the time ahead? I have an emergency fund and my job is quite secure. 

The equation is the same as ever. If you have cash that you don't plan to spend for the next 5-10 years, a diversified stockmarket investment is highly likely to outperform cash. People will still want goods and services so if businesses close, others will meet the demand.

I would be looking closely at how long my emergency fund will last if my job isn't as secure as I thought. The panic may also push up prices so your emergency fund could be drained more quickly.

If you wait until it feels like we have "started to get through this" you will have lost money by waiting, because the stockmarket will have gone up by then.

EdGasketTheSecond

This time its different, we headed for long drawn-out depression territory probably with high inflation as well.

Alexland

EdGasketTheSecond said:

This time its different, we headed for long drawn-out depression territory probably with high inflation as well.

Maybe but it's worth remembering that even at the bottom of the market in previous crashes the future prospects for growth looked pretty dire.

Shedman

EdGasketTheSecond said:

This time its different, we headed for long drawn-out depression territory probably with high inflation as well.

Certainly feels like it's already depression territory in our house at the moment ....  

Anyway the wife reckons if she has to spend weeks alone cooped up with me then I'm at more risk of her doing away with me than the CV getting me first 

Always a silver lining to any situation though...it means that we can't go and visit the MiL for weeks

Malthusian

Not "Even at the bottom of the market", especially at the bottom of the market. The market was at the bottom in March 2009 precisely because all experts agreed that we were in for a decade of recession, the Baltic Dry Index was signalling a total shutdown in world trade and everyone should sell everything before it got any worse. Future prospects for growth look worst when they are at their best.

This time its different

lol

we headed for long drawn-out depression territory probably with high inflation as well.

After which equities will beat cash over the long term exactly as they have done after every other drawn-out depression and period of high inflation, including the Great one.

If inflation is going to be high then staying in cash will lose even more money. The link between inflation and equities is impossible to spot in a crash like this one, but investment in real assets and the companies that produce or own them still allows wealth to grow with inflation instead of being eroded by it.

If goods and services are more expensive, who is producing them? Who owns them? Whose profits will be higher? Who benefits? Certainly not those who stuck all their money in cash because someone on YouTube kept squawking "depression" as if they knew what it meant.

tropic_of_Username014

First, I know this is a savings & investment board, but it's worth emphasizing that what is most important is the public health crisis. The affects on investments are very much a secondary matter. Let's keep some sense of proportion.

The Imperial study makes it clear, if it wasn't already, that suppressing the infection (by having less than 1 new infection caused by each person infected), not merely slowing it, is the only viable way forward. Hopefully the UK government are now pivoting to the correct policy.

This will require (among other things) extended periods of reduced social interaction for the whole population, over much of the next year. Though Imperial suggests that it may be possible to use the number of new ICU admissions as a guide for when to relax and later re-impose some restrictions.

Returning to investment, that is going to have big negative effects on the economy. However, by now we have had large enough stock market falls that it's surely possible that prices have fallen far enough to reflect the worsened economic prospects, or further. So I don't see any obvious reason to change investment strategy. Stock markets remain the place I'm going to put/keep most of the money I won't need to spend for 10+ years, and perhaps some of the money I won't spend for 5-10 years.

As ever, the same people who've been predicting high inflation since the GFC are still predicting it. Which seems pretty ridiculous to me, given that in the short term, the economy will be contracting, and people will have lower incomes and be cutting many areas of expenditure; and when the lockdown ends, many people's finances will have been damaged, so they will be in no position to increase spending very quickly. There is a risk of short-term rises in the prices of some things, due to supply shortages; that is absolutely a concern for people who are struggling with covering their essential expenditure in the short-term; but not for people with capital to invest for 10+ years, because such short-term shortages will be temporary.