Will another lockdown affect investments and pensions?
The initial market panic as a new strain of COVID-19 emerged is at first understandable as media talk of new lockdowns and restrictions. But once you pause for thought there are many reasons to be less concerned.
Firstly, in March 2020 we moved from normal conditions to lockdown in less than a month. In truth nobody could predict the effects on society, the economy or individuals. The level of uncertainty today is greatly reduced as we have a better understanding of what to expect.
Secondly, markets always over-react. It is just a normal human response. The results were sharp drops often followed by rapid rallies in markets, as we saw after the Brexit vote and initial COVID-19 lockdown. You just need to wait for them to stop their panic and look at the fundamentals.
Thirdly, we as a society are better prepared. From a health point of view, we have vaccines, treatments for those who are ill and better testing facilities. Companies know how they need to change and have learnt lessons, so they can quickly adapt. As the situation evolves, we have solutions which can be adapted.
Finally
We are in a better position economically than anybody forecast in March 2020. For example, across the developed economies, the forecast of mass unemployment did not materialise. In fact there is a skilled labour shortage in many sectors. Whilst there were a notable number of larger companies who ceased trading during the initial period of restrictions, we have also seen companies evolve and strengthen as they were forced to make changes.
Not a Bed of Roses
We are not for one moment saying that further restrictions and lockdowns will not hurt. However we are not facing economic ruin either. Forecasts of millions without work, failing health systems and huge increases in poverty were wrong the first time and will be wrong again. There are, in our opinion, greater threats to markets such as a geo-political falling out between the world’s larger power houses, China, USA and Russia. Even these should be no more than short term blips. The reason why we have such faith is, as COVID-19 has shown, we can and will adapt to changing circumstances.