“The stock market is a device for transferring money from the impatient to the patient,” says a classic quote from US investor Warren Buffett.
Image: Lars Skovgaard Andersen, Investment strategist, Danske Bank
However, patience is a difficult virtue to master at the moment as we are constantly reminded of the coronavirus’s negative impact on people and economies, and some days experience very pronounced falls in equity market prices. Nevertheless, right now is the moment you as an investor need to shift your focus from short-term developments and look further ahead.
Our key message in these difficult weeks is that you should stick with your strategy – ie, the overall allocation between equities and bonds that suits your investment profile. Common to all historical crises is that equity markets have always rebounded strongly, and we expect that will be the case this time too. Furthermore, we believe the worst is behind us in terms of the equity markets.
Survival of the fittest
However, sticking to your strategy does not necessarily mean remaining passive. On the contrary.
If you have placed your money in an investment solution via Danske Bank, then professional portfolio managers will ensure your investments are continually adjusted. However, if you are investing your savings yourself, you need to ensure your money is still invested optimally. We provide some input on this here:
At Danske Bank we expect the shutdown in the global economy will have an extremely negative effect on the economy for a couple of quarters, and that we will then see a recovery in economic activity in the course of H2 2020. However, some companies will probably not survive the corona crisis or emerge at the other end in a weakened state. In contrast, the strongest and most cushioned companies will have the best prerequisites for pulling through the crisis and potentially gaining ground from competitors.