We have experienced extreme volatility in markets in the wake of the COVID-19 pandemic. If your crystal ball didn’t provide you enough warning to liquidate securities at the peak of our recent bull market, which has well and truly come to an end, then the generally accepted view is to hold firm and wait for the eventual recovery.
Many may feel unnerved and just a little seasick, even on dry land while watching the fortunes of their investment portfolio. Markets have come under immense pressure recently, but not all investments are well suited to make strong recoveries. While many companies may have looked to have equally favourable outlooks in the good times, they may not have equally good prospects to recover from the recession we are now facing.
Companies that possess certain qualities will most likely not only survive the current downturn but also thrive in due course, these include but are not limited to:
(a) funding – having cash in the bank and low debt levels, balance sheet flexibility is now more important than ever.
(b) leadership – the ability of those at the top to make swift, smart and, in some cases, hard decisions.
(c) sector durability – companies operating in sunset industries which are ripe for disruption will struggle, while those operating in new industries will likely do better.
While it’s not a great time to be jumping ship, it is a good time to make sure you are on the right ship to ride out the storm. The storm has battered most companies but not all were as well positioned to handle the strong winds and rough seas. When other ships sail away to smoother waters, you don’t want to be left going down with a sunken vessel or in the water swimming against the current.
If you’d like some advice or a discussion about your investment portfolio’s prospects, please contact your Maxim Financial Advisor. We would love to hear from you.
This article reflects general views and opinions of Maxim Financial Markets Limited at the time of publication. Nothing within the article should be relied upon as a basis for making any investment decision. Please contact us to seek specific investment advice before making any investment decision. A Financial Advisor disclosure statement is available upon request.