The COVID-19 bear market – update from our investment director

Published 23 March, 2020

Latest update from our investment director, Glyn Bolton, on the impact of COVID-19 on global markets.

As the COVID-19 virus continues to spread, so does its impact on both our everyday lives and global markets. In recent times, we have seen values of almost all assets fall, and are now officially in a ‘bear market’.

There are broadly three types of bear market:

  1. cyclical
  2. structural
  3. event drive

This particular bear market is clearly driven by one single event; the spread of the COVID-19 virus.

Previous event-driven bear markets include the US market shock from the Iraqi invasion of Kuwait in 1990, and the oil price shock to the UK market in 1973/4.

Cyclical and structural bear markets tend to be relatively long lasting, whereas event-driven bear markets have historically regained their previous levels inside 15 months. The most famous example of a cyclical bear market is the long bear market that ran from 1929 to 1937.

Event-driven bear markets are typically V-shaped, in that the initial shock eventually dissipates, which seems very likely in the current circumstances, and there is then a successful policy response.

This event is global in reach of course, while other bear markets were confined to a narrower range. It also seems to be a lot bigger and have moved a lot faster than other bear markets. The shock is significant and has spread worldwide. It remains to be seen how effective government policy is going to be in tackling both the virus and markets.

It seems likely that there is going to be more bad news over the next couple of weeks. The US unemployment figures promise to be quite shocking, and the spreads on some high yield bonds are quite unprecedented.

So, while we believe that this market will recover in relatively short order, it seems unlikely to us that it will return to its previous levels any time soon.

At times like this, experienced active managers tend to outperform passive (index-tracking) investments. An experienced active manager can pick and choose which areas they invest in; which is likely to be a distinct advantage in the current climate. As clarity clients will be aware, under ‘normal’ circumstances we typically prefer a blended approach – using index-tracking funds in efficient markets to benefit from the lower costs, with active management used where it can add most value. We will, of course, be carefully monitoring our model portfolios and buy list funds and will keep clients updated as appropriate.

For more Information

If you have any questions about this update - or indeed anything else relating to your financial planning or investments - do get in touch with your usual clarity adviser. Or contact us on 0800 368 7511 or

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