Royal Bank Invest Outlook
Latest investment updates
Here you’ll find your update on Royal Bank Invest and other investment news, to help keep your finger on the pulse.
Quarter 2 2020 investment news
Take a look at the invest activity from 1st April to the 30th June
Buoyant markets in June helped cause positive performance across all the Royal Bank Invest funds over the quarter. This built on the rebound in April and May and has gone some way to mitigate the negative returns earlier in the year.
While most funds are showing a negative return over the year to date, performance remains strongly positive over the longer term. Big market events such as we’ve seen in recent months can have a major impact on the short term, but markets tend to bounce back.
The manager believes that, while Investing can be unnerving when markets fall, the last three months have shown how staying invested could be a better option than cashing in and crystallising a loss.
Lower-risk strategies have, of course, been less affected by recent market moves. Over the longer-term, however, their returns are well below other strategies that have more invested in shares and other risk assets.
Investor confidence grew steadily in the second quarter as the trend in coronavirus infections reversed and governments and central banks kept supportive economic policies.
Accordingly, stock markets around the world bounced back from the sharp falls in Q1 as the initial panic subsided and investors started considering the opportunities ahead.
Most markets recorded big rises between April and the end of June – the S&P 500 had its best quarter since 1998, and the FTSE 100 its best since 2010. This shows how quickly markets can bounce back after big falls, and adds context to the manager’s view that long-term investing requires riding out bumps along the way.
The stock market rally was first led by the health care and tech sectors, which proved relatively resilient during the sell-off. In May, some sectors that struggled earlier in the year saw positive returns, including banks, energy and oil, transport and homebuilders.
Despite improving investor sentiment, stock markets are yet to fully recover from the earlier losses. UK stocks in particular have fallen behind other markets – the FTSE 100 includes a high proportion of energy and oil companies which have suffered due to falling demand, and a lower proportion of the tech and health care stocks that benefited from the outbreak.
But the manager does not believe the current downturn will extend to a depression. The economy was in good shape before coronavirus, and the recovery is building on a sound financial foundation. Markets are largely ignoring the bad news and focusing on central bank and government stimulus measures. Those measures help navigate the short-term economic tempest and create opportunities for economies to invest in the future, providing further comfort for investors.
Fund positioning and outlook
After reducing our holdings in riskier assets earlier in the year, we’ve been adding to shares and corporate bonds to take advantage of the increase in investor confidence. We added to Japanese shares and investment grade bonds in May and US shares in June. We think these will do well as the economy recovers from the effects of the coronavirus lockdown.
The manager believes we’re unlikely to see a long economic stagnation. Once the medical crisis is brought under control, we believe the world economy will steadily get better.
Of course, there is still some way to go before the crisis is over and many people are still suffering severe hardship. Localised outbreaks of COVID-19 continue and lockdown measures are being imposed in response.
But the data shows that people are returning to work and contemplating spending again. This can only be good news, and investors are positioning themselves to benefit from the economic recovery.
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 not recover the amount of your original investment.