After dramatic falls, are opportunities starting to emerge?


As Covid-19 continues to spread uncertainty and prompt market falls, experts at Schroders have highlighted the possibility that current valuations could become more attractive for investors.

On the surface, market falls appear to be very dramatic. Since its peak on 19 February 2020 compared to close of business on 12 March, the US S&P500 index has fallen 26.6%. However, when put into context, it is important to recognise that shares began the coronavirus outbreak at very expensive levels, which made them susceptible in any case to changes in investor sentiment.

At present, shares are priced in expectation of a technical recession (when the economy shrinks for consecutive quarters). Following the surge in government intervention on public and business activity, it is thought the potential for a longer recession is becoming increasingly likely, although the real outcome remains to be seen.

From an investment perspective, the team at Schroders expect valuations to fluctuate for the near future, influenced by investors weighing up the prospect of further lockdowns and continued market decline versus the impact of any government and central bank intervention which could cause short term bounces.

Considering the risks and uncertainty, caution is still advised and seeking advice from a professional adviser encouraged before taking any action on portfolios. But, whilst markets remain volatile, opportunities are beginning to emerge.

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Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.

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