The FCA has published guidance for listed companies relating to the announcement of their results. They have strongly requested that all listed companies observe a moratorium on the publication of preliminary financial statements for at least two weeks.
It’s a sensible move to curtail an element of bad news and one that was pre-empted by the team here at The Armchair Trader.
Many companies have understandably been posting profits warnings in light of the economic shutdown and we have taken the view that this is currently a given. Our Three Quick Facts articles will now focus on how companies are dealing with the crisis where we feel they are in good shape – and we will hold off on writing a piece at all if the companies announcing do not meet our criteria, if indeed any report at all.
We made the decision to stop publishing a ‘Short of the Week’ last week too. It’s become a little too easy to pick shorts in this climate and the column does not have its original value. For those of you interested in shorting the markets, pick a stock or an indices and you’ve a good chance to see it lose value right now, but beware the turbulence on the way down and make sure you understand how margined trading works.
The challenge for us has become a different one. We are shifting our attention to investing opportunities that are likely to rebound quickly once the economic crisis is over as well as some stocks which have already started a comeback.
History tells us that the financial markets recover and we feel that this current crisis is no different. So long as there is a reason for markets to exist – efficient access to capital and price discovery – they will remain in demand. We are now starting to see the Chinese economy move again as the Coronavirus risk in East Asia abates and while Europe and the US are in the midst of their own lockdowns, there will be a light at the end of this tunnel.
Economies will take time to kick back in to gear and there will no doubt be casualties to certain sectors that simply won’t be able to sustain any kind of long-term shutdown. It may take 6 months, or even twelve months to regain some semblance of normality and the new normal may be very different from the old normal.
What does this mean for you?
Now this is a scary thought for many who are seeing their lifetime investments and pensions losing considerable value over the last few turbulent weeks – but for those of us old enough to remember, this has happened before.
It is here where The Armchair Trader team can provide some much-needed consolation. We’ve seen this before and we’ve come through the other side.
If you haven’t already sold
Firstly, if you still own stocks and shares, selling at this stage will only compound your losses. While no one can accurately predict when the financial markets will see an upturn, it may be tomorrow and if that occurs, you would lose out on any early movements.
Secondly, if you are following the markets, you’ll note that many companies are withholding their dividends in order to maintain cash reserves to keep them going through this period. However, there are dividends to be found and smart investors will be able to take advantage of the benefits of compounding through dividend re-investment.
Investors sitting on cash
If you followed your instincts in the early stages of this downturn and you are sitting on cash, now is the time to be patient. We don’t know if this is the bottom of the drop, or just the tip of the iceberg. There are two ways to manage your re-entry back in to the markets.
Your first option is to hold back until the markets and the economy show visible improvement. This strategy will likely mean that you will miss out on any early upward momentum – and bear in mind that when the markets turn, they turn fast as the bulls return.
Your second option is to start buying small stakes in your chosen stocks or funds at different price points. This method may not yield initial results if the markets continue to fall, but it will reduce the average price of that asset over time and ensure that you won’t miss out on an upturn, or any dividends.
Don’t forget that you can still deposit cash in to a stocks & shares ISA before the 6th April end of year deadline. You don’t have to invest it, but it will enable you to make the most of this year’s allowance.
What will we be doing?
For The Armchair Trader team, it’s business as usual. We are committed to identifying great investment and trading opportunities for you to consider, but we’ll be focusing our efforts primarily on steering you through this difficult time.
We will be writing about stocks, indices, currencies, commodities and more over the coming weeks that we feel will provide strong rebound opportunities once the markets reverse their momentum. Make sure you sign up for our daily newsletter so you don’t miss out.
Our forum is available for you to use should you wish to post any questions. It’s a little quiet on there but the team here are happy to jump on and respond to any thoughts or concerns you may have. While we are unable to provide advice, we can offer the benefit of our collective experience. Let’s see if we can make use of the forum in a positive way.
Finally, we have been overwhelmed by the number of visitors that have chosen to visit us since the crisis began and we are seeing our newsletter numbers rise significantly as a result. This will help us to attract more advertisers in the future in order to continue providing our free service and develop new ones for you. We’d like to thank you all for your fantastic support.
Wishing you good health!