This week, the news broke that the Financial Conduct Authority (FCA) has put a block on companies publishing results because of the coronavirus crisis. Speculation inevitably followed that it could lead to a full market shutdown. Could the FTSE 100 really close tomorrow, and what should we do?
The FCA’s ‘strong request’ asks companies to “observe a moratorium on the publication of preliminary financial statements for at least two weeks,” but I’m not entirely sure what that will achieve. The FCA says that, due to the shifting nature of the coronavirus response, “it is important that due consideration is given by companies to these events in preparing their disclosures. Observing timetables set before this crisis arose may not give companies the necessary time to do this.”
But that’s not going to change what happened in, say, the year ended December 2019. So why can’t we have those results? Sure, the outlook for most companies will be up in the air. But we know that anyway, and we can wait for further trading updates. And what difference will two weeks make?
FTSE 100 closedown
Anyway, my puzzlement aside, how could we cope if we should face the market shutdown that some people fear? Firstly, I really don’t think the speculation is helpful. One of the last things we need now is the spreading of rumours, which would surely scare more people into selling their shares. And that could make for more turmoil, and perhaps increase the chances of intervention by the authorities.
But then, let’s look to the bigger picture. Warren Buffett urges us to “buy on the assumption that they could close the market the next day and not reopen it for five years.” But do you really do that?
Long-term hold
I try to, and I never buy shares that I don’t intend to hold for at least five years. I don’t always get it right, and I’ll sell sooner than that if I realise I made a mistake — for example, not sticking to my usual investing criteria. My purchase of Premier Oil was like that, and when my mistake had sunk home, I sold. As it happens, I’m now glad I did.
As for my current holdings, I have none that I want to sell at today’s prices. Or for at least five years, in fact. So if the FTSE 100 closed its doors for trading tomorrow, I’d have no problem on that score.
I want to buy
A market shutdown would stop me buying shares, though. And as the current market crash is making a lot of shares look very tempting, I really would not like that.
But if I couldn’t actually buy shares, that wouldn’t stop me dripping money into a Stocks and Shares ISA, or transferring what I can afford into my SIPP. It would be tempting to hold off on the savings front if there were no shares to buy for a while, but I reckon that’s the biggest mistake I could make. Money I don’t transfer over to my investments now is money that won’t compound for me over the next five, 10, and more years.
But what will I do specifically, now, in case the FTSE 100 really does close? Absolutely nothing!
