The most commonly asked financial advice questions during the Covid-19 pandemic
It’s strange to think that those things we are all so familiar with at the moment just didn’t exist at the start of 2020. If you’d seen someone wearing a face mask or visor in a shop, you’d have wondered what on earth was going on – and now it’s the law. Most probably didn’t know what the word ‘furlough’ meant, yet according to government statistics on the Coronavirus Job Retention Scheme, there are now 9.5 million people whose jobs have been furloughed. As for ‘social distancing’, someone crossing a street to avoid you would have seemed rude a few months ago, and now it’s almost expected.
With all the changes in the way we live, do we also need to change our lifestyle financial plans?
Life for all of us has changed due to Covid-19, and while lockdown has provided us with an opportunity to step back and reflect, it’s also seen a rise in the financial questions we have found ourselves answering on an almost daily basis, so we thought we would share some of the most common financial advice questions we’ve been asked.
How bad is it all really?
It’s not great. In the USA, official statistics show that 15% of the working population is now unemployed, although many believe the figure to be closer to 20%. Here in the UK, our unemployment figures are currently under 10% thanks to the government’s furlough scheme, but that won’t last forever and there is no question that a rise in unemployment over the coming months is possible. The impact has been far-reaching and the world as a whole has taken a hit. We are likely to experience a 4% shrink in the global economy this year, which will be the worst dip since the 1930s. Government intervention has no doubt prevented this being even worse, but this has come at a cost and government debt has been increasing rapidly.
In the UK the government budgeted for £55 billion in borrowing for the whole year – in April alone they borrowed £62 billion. We are not alone though and every nation in the world has been experiencing increasing debt levels as they try to stabilise their economies.
Why is the market ignoring the economy?
The important thing to remember is that historically, markets have always recovered. We may be experiencing falls now, but these won’t last forever. Also, we are in unchartered waters. No one knows what is going to happen, so there is no point speculating. What we have seen though is that there has been a wave of stimulus to keep things afloat and no one is expecting the world to suddenly fall apart. If you can sit tight, there’s no reason not to be optimistic.
Why are certain shares still expensive?
There have been winners and losers in the pandemic. Technology and consumer companies have rebounded, with companies such as Zoom thriving, while airlines and the travel industry continue to suffer. This makes sense though, as even if there were to be a second spike, we would expect Zoom to survive it, while it’s obvious that some of the airlines might not.
Is now a good or a bad time to invest?
Since the markets began falling this question has been asked a lot and, despite the changes we have seen since March, our answer has always remained the same – if you are taking a long-term view as part of your overall plan, then now is always a good time to invest. A lifestyle plan should be aimed at meeting your goals in the long term and is not something that should be reacted to or changed whenever there is a dip in the market. Short-term market movements should never distract you from your end plan.
What about Brexit?
Who would have thought that something could so rapidly overtake Brexit for news coverage! Brexit is still of course an issue, but Covid-19 has put it into perspective somewhat and the threat to human life has naturally dominated over the discussion of trade deals. That being said, there are not too many direct impacts expected as a result of Covid-19, other than the possibility of delays. Relationships between the EU and the UK probably haven’t improved, but they probably haven’t worsened either. Quite simply – it’s slipped down the agenda for both sides. As we slowly return to a new normal though, Brexit will continue to be discussed and our plans for leaving Europe will be finalised, just as they would have been before the pandemic.
How will the world look post Covid-19?
We can make predictions, but they are just that. None of us can really be sure and if the last few months have taught us anything at all, it’s that we should live for today. There may be a vaccine developed, or there may not be. We don’t believe that the world will fall apart though. Things will return to some sort of normal and while it may not be the same normal we are used to, we will all adapt just as people have done throughout history.
Whatever happens, we will always be here to help you plan for your future and live the lifestyle you most desire.
This article does not constitute financial advice and should not be construed as such.