The pandemic has wreaked havoc on the markets and an announcement of another national lockdown has thrown yet more uncertainty into the mix.
The spread of coronavirus early last year wiped trillions of dollars off global stocks and March saw the FTSE plunge more than 10 per cent in its worst day since 1987.
And as the virus crisis is still not yet under control, we could be in for another year of uncertainty for stock markets and investors. Here, we address the questions on every investor’s mind…
More to come? The spread of coronavirus early last year wiped trillions of dollars off global stocks and March saw the FTSE plunge more than 10 per cent in its worst day since 1987
What will a third lockdown mean?
In the grand scheme of things, the latest lockdown will probably not mean that much for investments.
‘Shares in London have been largely resilient amid fears that the third lockdown will cause another aftershock,’ says Susannah Streeter from broker Hargreaves Lansdown.
She says tighter restrictions had already been expected, with any change in value already ‘priced in’ for most companies.
While sudden announcements can affect certain sectors – airline stocks dipped more than 5 per cent on news of tougher travel restrictions – the usual advice for investors is to ignore short-term noise.
Even if you hold the likes of easyJet or IAG (the owner of British Airways), there’s a tendency for these short-term movements to cancel themselves out.
Will the FTSE dive again this year?
As with all things investing, it’s impossible to know for sure. But there are reasonably solid grounds to expect this year to be better than last.
With Brexit done and the great vaccination effort under way, the FTSE has been freed from its two biggest uncertainties.
The FTSE All Share, for example, has now recovered two-thirds of the losses it made during the big Covid crash of March 2020, suggesting most investors expect a brighter future.
But savers should be careful about assuming the FTSE’s performance is necessarily representative of the wider economy, or their portfolios.
Rather than a measurement of Britain’s economic muscle, the FTSE 100 is an index of the biggest companies listed in London – many of whom do much of their business abroad.
How it performs will almost certainly have some impact on your portfolio.
The FTSE All Share has now recovered two-thirds of the losses it made during the big Covid crash of March 2020, suggesting most investors expect a brighter future
Should I invest worldwide?
Tom Bailey, from the online platform Interactive Investor, says that British investors sometimes suffer from a ‘home bias’ – putting too much of their money into UK companies.
While it can be tricky to buy foreign shares directly, it’s easy for UK investors to opt for dedicated investment funds.
The most popular fund bought by Hargreaves Lansdown’s clients last year was Baillie Gifford’s American Fund, which invests heavily in U.S. tech stocks.
Other choices, such as Rathbone Global Opportunities Fund, look to spread investors’ money across stock-markets worldwide.
A sum of £10,000 invested five years ago would now be worth £23,600 (before fees).
Is it time to snap up a bargain?
Almost certainly, yes. But, of course, it’s spotting them that’s the difficult part.
First, it’s worth noting by some respected measures (which compare a company’s profits to its share price), much of the UK stock-market is undervalued.
Most investors expect that, if UK stocks do enjoy a Brexit bounce, or a post-Covid spending splurge, it will be the smaller companies of the FTSE 250 that benefit.
The best thing is likely to look to a designated ‘growth’ fund. Franklin Templeton’s UK Mid Cap fund picks smaller FTSE firms which it believes have potential. Holdings include housebuilder Redrow and kitchen supplier Howdens Joinery.
How can I spot the best bets?
Investors often have a tendency to beat themselves up about missing out on the last big thing.
The shock of the coronavirus, and the rise of lockdowns, led to all sorts of companies rocketing in value in 2020.
Shares in delivery champion Ocado, for example, doubled in value. While gambling company Flutter (owner of Paddy Power) gained 60 per cent.
However, shares in video conferencing giant Zoom rocketed last year, but have since fallen sharply on vaccine news.
An investment in Zoom at the October peak would now be worth 40 per cent less.
A cautionary tale for speculators looking for quick wins.
moneymail@dailymail.co.uk
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