It would be fair to describe the current economic situation as troubling. With employees being furloughed or forced to work from home, and childcare disrupted, the impact on aggregate demand in the overall UK economy has been severe.
Economists are predicting that the UK will enter a recession in 2020 as the effects of the pandemic ripple through the manufacturing and service industries.
The stock market has reflected this disruption, registering a series of sharp downswings in February and March, although the FTSE 100 has since recovered somewhat during April and May 2020. The mood is still negative, with traders being unsure of whether the relaxing of restrictions on the service and entertainment industry will nurse the economy back to health, or merely be too little too late to stop the UK economy from slipping into a more prolonged downturn.
Out come the bargain hunters
Against the background of this bleak picture, many self employed or employees are still thinking about saving. Either due to being in the right place at the right time, or the generosity of the UK government furlough scheme, they still have a disposable income, and are eyeing up buying opportunities in the stock market.
Of course, every downturn attracts bargain hunters in this fashion. When the share prices of companies are low – prized income-generating businesses can be snapped up at a low price, representing good value when the (still healthy) long term picture of the company is considered.
This particularly applies to dividend investors. Dividends may have been temporarily cut by companies looking to hang onto cash for safety while the picture is uncertain. However by buying good companies at a reduced price during recessions, dividend hunters hope to ‘lock in’ an excellent dividend yield by the time dividends begin flowing again several years later.
Choosing a stockbroker account
Of course, to jump into the stock market, investors need a platform or financial institution to do so. If it’s their first time investing, they will need to select a stockbroker that provides the right level of service for them and their volume of trading.
Any investor looking for a stockbroker during a crisis won’t struggle to find good options. Stockbrokers can have a difficult time during crises. Trading volumes typically surge during volatile times, as investors jump in and out of the market and money flies around the globe at an accelerated rate, however, the net effect tends to be for money to flow out of mutual funds and into cash (and sometimes out of the broker account completely). With assets in cheaper, safer funds or withdrawn entirely, stockbrokers usually see their assets under management reduce and can charge fewer account fees as a result.
How does a crisis impact your choice of stockbrokers
During a crisis, you’ll want to be confident that the stockbroker you choose will still be around in 1, 10 and even 50 years time. Stocks and shares bring enough risk on their own – you don’t want your investment platform to give you worries on top.
Brand new stockbrokers may not have even been ‘tested’ during a crisis before, so if green-eared start-ups make you nervous, then pick from the handful of stockbroking firms or banks that have operated through good times and bad through many economic cycles over the last 70 years.
You might be surprised but this list is still a long one and features most high street banks and the well-known stockbroker names.
Danis Woods in Businessman, investment banker and stock exchange traders. On the same time he loves writing financial blogs to shed lights on different aspects that new and existing businessman are not aware of.
Leave a Reply