The onset of the coronavirus caused one of the sharpest nosedives in the history of global capital markets. Between Feb. 20 and April 7, the Nasdaq tumbled an unprecedented 1,864 points, a loss of nearly 20 percent. The Dow Jones Industrial Average fell more than 22 percent over the same weeks.
The slump ended an 11-year bull market that started in 2009.Yet, by Nov. 24, the Dow closed above 30,000 for the first time. It reached another record Dec. 17 at 30,303.
Wealth managers in the Valley region have experienced a wild ride in 2020, counseling clients through the lows and the highs. As one finance professional profiled in this report put it, the market turbulence occasioned “a lot of emotions.”The volatility will have long-term effects on the economy, wealth management professionals and their clientele, according to a report from consulting firm Oliver Wyman and investment house Morgan Stanley titled “After the Storm.” The study estimated the cumulative wealth of high net-worth investors will lose “more than a year of growth versus pre-COVID-19 forecasts before rebounding to growth in 2021. We see HNW wealth declining by 4 percent or $3.1 trillion in 2020, a major departure from the previous decade’s consistent annual growth trajectory.”Uncertainty will become the major theme of post-COVID investment, the study predicted. As a result, defensive financial products such as insurance will become more important to customers of financial services. Also, “COVID-19 has permanently changed the way wealth managers deliver advice,” so upgrades in communication technology and consolidation in the financial sector are future considerations for investment managers.A survey of wealthy individuals by market research firm Affluential found that they weathered to storm because of the quick rebound in the stock market, but “the COVID-19 crisis has left a profound impression, changing their investment behavior and attitude to risk.” Going forward, their top priorities will be stability and liquidity.
“When we asked them where they invest their wealth post COVID-19, we were surprised to see that a large share of their wealth is now in cash,” the report stated. “Steady capital growth and steady income flow are the two top financial goals for this segment, showing a decreased appetite for risky investments.”While the pandemic caused swings in the equity markets, it pushed down interest rates on debt. The large mortgage companies in the Valley region found an eager market as a house refi became a popular defensive maneuver to save money in the post-COVID economy, as detailed in the final story of this report.
– Joel Russell
Wealth Managers’ Wild Ride
