Latest investment update
Here you’ll find your update on NatWest Invest and other investment news, to help keep your finger on the pulse.
Quarter 3 2020 investment news
Take a look at the invest activity from 1st April to the 30th June
The NatWest Invest funds made a positive return over the last quarter, despite the spectre of a coronavirus second wave towards the end of the period. This took its toll on market confidence, but only after global economic activity had picked up throughout the summer.
The Lower and Lower/Medium Risk funds have preserved their value over the year to date, in line with their goal of reducing the impact of market ups and downs. Having more invested in shares has seen the three Medium and Higher Risk funds down over the year so far, but performance is strongly positive over the last three years. All funds have returned double figures for that period, except the Lower Risk fund which is just shy of it at 9.7%.
This demonstrates the importance and benefit of long-term investing. Major events in the world can make a big difference to markets but those markets tend to recover over time.
The manager believes that economic conditions are likely to be more challenging over the rest of the year, but the longer-term outlook remains positive, largely thanks to continued support from governments and central banks.
The manager’s view is that the world economy will pick up speed next spring, as medical solutions to the COVID-19 pandemic become available.
Market update as at 30 September
World economic activity picked up over the summer as lockdown restrictions relaxed. Consumer spending increased and businesses became cautiously optimistic, with key economic indicators turning positive.
Then many regions, including the UK, reintroduced measures to slow an increasing coronavirus infection rate towards the end of the quarter, and there were noticeable falls in some markets.
Despite this, stock markets around the world still rose over the quarter, with the MSCI All Countries World Index returning 6.9% in local currency terms.
Meanwhile, measures taken to support economies through the pandemic, such as low interest rates, and the popularity of perceived ‘safe-haven’ investment types such as gold, drew investors away from government bonds. UK government bonds returned -1.3% over the quarter, and their American equivalent returned just 0.2%.
Tech stocks fell sharply early in September, dragging the tech-heavy US indices with them – the S&P 500 recorded its worst trading period since March. But before the deep drop, share prices in the tech sector had soared ahead of the rest of the market, pushing leading US indices to record highs.
The manager does not see the falls at the end of summer as signalling a deeper market retreat. Stock markets were overdue a correction after rallying strongly since the spring. The falls were a healthy mix of profit taking and some rotation in positioning.
Geopolitical risk continues to loom over markets. The quarter came to an end with arguably the most chaotic US Presidential debate in the country’s history, as President Trump and Joe Biden took verbal pot shots at one another. Just a few days later, it was announced that President Trump had contracted coronavirus. Closer to home, the UK government’s controversial Brexit bill raised the stakes in its negotiations with the European Union, and sterling fell because of the ensuing uncertainty.
Fund positioning and outlook as at 30 September
After reducing their holdings earlier in the year following market falls, the manager has been adding to shares and corporate bonds over recent months, reflecting their confidence in the long-term prospects of the economy and markets.
The manager increased the amount invested in shares in July, having added to Japanese stocks and investment grade bonds in May, and bought more US shares in June. The manager believes these investment types should do particularly well as the economy recovers from the effects of the coronavirus lockdown.
Although the final quarter of 2020 is likely to present challenges for investors as the coronavirus pandemic further unfolds, the manager doesn’t see a long period of economic stagnation ahead. Government and central bank support for the global economy is doing its job, the longer-term outlook remains positive, and a medical solution for coronavirus, when it comes, should keep economies in recovery mode.
When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may get back less than you put in.