7 most asked financial advice questions during the Covid crisis

It feels like a long time since life was ‘normal’. Daily commutes, working environments, supermarket visits and weekend activities have changed for most of us due to Covid-19. Some of us will relish the chance to get back how things were and some of us will make permanent changes to the way we live our lives.

As we all begin to contemplate what life might look like in the coming months, we’ve had no shortage of questions and queries on how life might look for our clients’ financial plan. Inspired by the need for clarity at the time we need it most, we have taken on the seven most common financial advice questions we’ve received about the aftermath of the pandemic.

1. How bad is the mess?

Officially, 15% of the US working population is now unemployed – unofficially the figure is closer to 20%. In the UK, the furlough scheme has kept the figure under 10% for now, but for almost every nation in the world, double-digit unemployment has become a threat.

So, it’s bad. Monetary policy and government support have softened the blow, but there’s no doubt that the world has taken a hit. The global economy is likely to shrink by at least 4% this year – the worst since the 1930s. It may well have been worse without intervention, but a recession is still a recession.

And the cushion has come at the cost of increasing government debt rapidly. The UK Government borrowed £62 billion in April; before Covid-19 the budget for the whole year was £55 billion. Every nation in the world is racking up wartime-like debt levels as they try to stabilise their economies.

Of course, for investors, there’s not just the mess to consider, but also how the clean-up goes.

2. Why is the market ignoring the economy?

We don’t know. There is no edge when it comes to the coronavirus – nobody we know of has extra information, or a better model. It may be that investors have just become habituated to the ‘bad news is good news’ cycle, by which anything negative in the economy is sorted out by the central banks pumping money.

The wave of stimulus has certainly created an air of optimism that the world won’t fall apart. Markets seem to be looking through the immediate economic data, which is normally a sensible approach. Now though, there’s so much uncertainty around a second spike – and the timing of a vaccine – that it seems strange to be so bullish.

3. Aren’t markets too expensive if there’s going to be a second spike?

On the surface, the rebound does seem to have been selective – technology and consumer companies have rebounded, whilst airlines and oil producers have continued to suffer. That makes sense intuitively, because Amazon will survive Covid-19, while Virgin Atlantic may not.

However, Amazon’s share price is now 30% higher than at the start of the year. That does start to look expensive – while it is true that Amazon is taking a slice of the pie from physical retailers, it’s also true that there is less pie to go around.

A second spike in Covid-19 would not only shrink the economy, it would also send confidence to rock-bottom. People would lose faith in the government, in the hopes for a vaccine, and in a quick return to normal. Equity markets aren’t pricing in much room for disappointment.

4. Is this a good time to invest?

This question has been coming in regularly since markets began falling. In March, people wanted to know whether to wait until markets recovered. In April, people wondered if they should wait for a pullback before investing.

Our answer is consistent. If taking a long term view and as part of an overall financial plan, today will be a great day to invest.

An investment plan should keep you on track for the long term, making sure you meet your goals. A well-designed one ignores short-term market movements because it is focused on the overall outcome, rather than the day-to-day ups and downs.

5. How will the crisis affect Brexit?

The crisis put Brexit into perspective. Loss of human life trumps trade deals – as it should. However, there aren’t likely to be too many direct impacts, other than the understandable possibility of delays.

Covid-19 won’t affect the eventual shape of the deal too much. The crisis has done nothing to improve relationships between the EU and the UK, but it hasn’t done too much to worsen things either.

Trade negotiations have slipped down the agenda for both sides – but as lockdowns end, normal course of business will be resumed. There’s still a long way to go though and lots of questions remain unanswered, of which perhaps most pertinent still is the question of the border on the island of Ireland. That’s nothing to do with the pandemic, and is still a problem without a solution.

6. What does this mean for income / dividends?

This year, dividends globally will be poor. Some companies are being asked not to pay dividends by governments, while others are taking the opportunity to conserve cash, so cancelling theirs as well. UK companies have cut an estimated £30 billion of dividend payments so far – and that’s based on earnings accumulated last year!

Next year, dividends are likely to be poor again. Even if the economic environment is more favourable, earnings will be lower – so there’ll be less to pay out.

Over time, normality will return. However, over the next couple of years any investment strategies that rely on dividends for income are going to face challenges – which is why we adopt a total return approach to managing money.

7. How will the world look post-Covid and how we are positioned for that?

Predictions about the future are easy to make. Correct predictions about the future are a lot harder. We just don’t know what kind of future we’re talking about – there’s a big difference between a world with a vaccine and one where Covid-19 is still a threat. We don’t think the world is going to fall apart, but we also don’t think we’ll wake up tomorrow and find we’re back to 2019. There’s a lot of room for error with timings and on outcomes.


Whatever the climate, we are here to help you to manage your finances and plan for your family’s future. 

If you would like a consultation with one of our Independent Financial Advisers about recent changes in your finances, do not hesitate to contact us by email: info@innesreid.co.uk or on our normal number: 01244 347 583 during office hours.

For further business updates regarding coronavirus, please visit our designated webpage at: www.innesreid.co.uk/coronavirus/

Past performance is not a reliable indicator of future performance. Investors should remember that the value of an investment and the income received from an investment can go down as well as up, and they may not get back the amount they invested.

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