Things could quickly go the other way
Right now, no-one knows when we will be over the worst – not even the world’s leading virus and pandemic experts. We at Danske Bank will therefore not be making cocksure claims about exactly when the virus outbreak will peak, and economies and equity markets bottom out.
However, our main scenario is that economic activity will begin to recover in the second half of 2020, and given the major fiscal and monetary policy stimulation currently ongoing, the global economy will have very favourable conditions for accelerating again once the virus outbreak dies down.
Experience tells us that the turnaround in equity markets will come some way ahead of the turnaround in the economy. Historically, equity markets have been 1-2 quarters ahead of the economy, and things can very quickly go the other way once investors begin to see the light at the end of the tunnel. We saw this in the wake of the financial crisis, for example, when the US S&P 500 index rose 72% in the 12 months following the 9 March 2009 low.
Stick to your strategy
Despite the current uncertainty, we generally recommend that investors stick to their strategy if it fits their investment profile – including their risk appetite and investment horizon. For many investors this in fact means they need to rebalance their portfolios; in other words, sell off bonds and buy equities so they continue to have the aimed for allocation between equities and bonds – and therefore the desired level of risk – in their portfolios. If you have invested in an investment solution from Danske Bank, professional portfolio managers will ensure the continual rebalancing of your investments.
This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.