Return of volatility shows value of caution

15 June 2020

The road out of lockdown hit a big speed bump last Thursday as equities fell dramatically after their strong recovery from lows in March. We expect occasional pullbacks like this as economies around the world navigate their way out of lockdown, as progress will not be in a straight line.

  • Last week's plunge in equity markets supports the cautious aspect of our optimism.
  • A rise in Covid-19 infections becomes problematic if it leads to another shutdown. For now the virus is re-emerging only in localised instances in the US with no sign of trouble in Europe.
  • Government bonds still have a place in portfolios as long as volatility is a risk and we are sticking with quality within our equity allocation.
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