SSQ Insurance's investment team is here to support you during the COVID-19 pandemic
The number of cases of coronavirus outside China has recently surpassed the number of cases in China, causing investor concerns and stock market declines in recent days. Interest rates have come down following announcements by central banks around the world and investors looking for safer assets. Restrictions on citizens around the world are increasing. As the virus continues to spread, policy makers are stepping up measures to flatten the spread curve.
The U.S. Federal Reserve has announced that it will purchase financial assets as part of a bid to inject liquidity into the bond market. Central banks are doing everything they can to provide monetary stimulus and ensure the smooth functioning of financial markets. Although we do not have the ability to see into the future to predict the impact of this pandemic, it is relevant to expect weak growth in the first two quarters of 2020. A recession is already being considered by most economists. We can only speculate on whether the market recovery will be a "U", "V" or "L" shaped recovery, but there will be a recovery when this crisis is over and pent-up demand is unleashed. The economic impact of this pandemic is already being felt and travel related industries and cyclical businesses such as those in the Industrials, Energy and Consumer Discretionary sectors are and will be negatively impacted.
The lack of market reaction in the early days of the pandemic can be explained by an underestimation of the likelihood of the virus spreading, while the extreme market declines over the last few days is a reaction to the understanding that this was incorrect. It remains to be seen whether the current market response fully captures the impact of the virus or not. Those who suggest that they know exactly where we are going from here are probably wrong, as this is a new situation in the modern financial age.
Investors should consult their financial advisor if their investment plan has changed. However, we generally do not recommend making changes unless your clients' financial goals have changed significantly during this period. Corrections are a natural part of the investment cycle and, over the long term, investors who stay invested are rewarded.
You may have noticed this, but SSQ Insurance had begun to position its investment platform more defensively in recent years, with fund offerings that offer generally better downside protection than the market. Defensive, value, high-dividend strategies, etc., have been introduced. You may even have noticed the introduction of our new Smart Beta Plus funds in June 2019, which consist of low volatility investments. Our new Smart Beta plus portfolio series has been one of our flagship products in terms of marketing campaign since its launch, which has helped our clients invest in a product with lower risk than the market.
When markets are volatile, it is natural to worry about the impact on your portfolio or those of your clients. And when you're worried, you want to act, it's human nature to do so. If you have an established investment policy for your clients, they are probably already in the best possible position to go through this crisis. Take a long-term view, stay diversified, resist the temptation of market timing and stay invested. Despite the increasing number of headlines in the media, it is important to keep in mind that our portfolio funds are designed to help clients achieve their long-term financial goals and that their investment plans consider their ability and willingness to take risk. It's important to focus on what you can control. The discomfort of this crisis can cause humans to make emotional decisions, but emotionality/fear is usually more detrimental to achieving long-term financial goals than market volatility. While it's hard to ignore emotions, understanding the source of those emotions and channelling your energy into other activities can help you get through this crisis.
SSQ Insurance's investment team is aware that it can be unpleasant and difficult to see the value of investments fluctuate significantly. While these markets can be difficult for you and your clients, know that we actively monitor our portfolio managers, strategies, funds and turnkey solutions and ensure that the strategies in place are always the best for you and your clients.
We also want to assure you that we are always available, should you ever need us to talk to clients, get more details on market conditions or simply ask for advice. We continue to make every effort to take care of the investment platform. The best way to get through this crisis is to remain invested and disciplined by continuing to invest on a regular basis.
During this period of social distancing, take time with your family. Take time to do things you've been putting aside. Don't spend too much time in front of the screens and, above all, limit the number of times you look at your investment portfolio statements.
The Investment team