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Advisers see Covid variants as biggest risk to market stability

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Financial advisers believe new strains of the coronavirus, along with an uneven global vaccine campaign, pose the biggest risk to current market stability, according to a survey carried out by Quilter Investors. 

Financial advisers believe new strains of the coronavirus, along with an uneven global vaccine campaign, pose the biggest risk to current market stability, according to a survey carried out by Quilter Investors. 

Nearly half (46 per cent) of the financial advisers questioned said that new variants and failure to have a consistent global rollout of the vaccine would increase volatility in stock markets. This was followed by a quarter (26 per cent) saying that economic growth failing to materialise after the end of lockdowns posed the greatest threat. 

Recent headlines in the UK have been dominated on the spread of the Indian variant as it threatens the country’s roadmap for restrictions easing. And while the UK has administered over 80 doses per 100 people, the global figure stands at just 19 per 100 people as countries around the world scramble for vaccines to protect their populations. 

Advisers do, however, seem less concerned with how far stock markets have come since the pandemic lows of March last year and the inflation threat that looms. Just 8 per cent said the tech bubble bursting posed the greatest threat to stability, while only one in ten advisers said central bank policy error or worries about the debt burden were the biggest risk. 

Paul Craig, portfolio manager of the Quilter Investors Cirilium range, says: “We are in somewhat of an economic sweet spot just now as lockdowns end and demand returns. Companies are reporting tremendous earnings and consumers appear to be spending some of their lockdown savings as shops and holidays return. 

“However, markets are forward looking, so ultimately much of this is already factored into the share prices we see today. As such it is not going to take a lot to spark some volatility in markets. 

“It is interesting to see that financial advisers are most concerned with new variants and an uneven global vaccine rollout knocking markets off course, although these are ultimately two separate threats. So much is unknown about the new strains of Covid, so it is understandable if fears of another economic lockdown persist just as things begin to look up. 

“The vaccine rollout is going to crucial to bringing back global travel and trade, however. The UK has shown the way with its rollout and as a result is now reaping the benefits of this success, even if the initial pandemic response was left wanting. But should the vaccine rollout break down, or the variants manage to mutate to fight back against it, then the economic picture will no longer look so positive. 

“For advisers, it is clear diversification is more important than ever given this dual threat, and the existence of a number of risks out there just now. A focus on quality companies will see portfolios weather any storm that does come, while also benefitting in the post-pandemic economic environment.” 

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