Yorkshire ISA Experiment: Iran war causes March wipeout in local share values
The global economic impact of the Iran war has been playing out most noticeably at the petrol pumps for British consumers but the situation has also hammered the share values of Yorkshire’s listed companies.
Our ongoing Yorkshire ISA Experiment, which has been tracking the performance of the region’s listed firms since last July, highlights exactly what has played out.
For those not familiar with the experiment, we are tracking the performance of Yorkshire’s listed companies against the wider UK stock market as well as average cash savings rates. Readers have also made ‘Yorkshire champion’ selections by taking a single virtual share in up to 10 regional firms to see if their choices are able to beat the market.
When markets closed on February 27, the day before the US and Israel launched their attacks on Iran, 60 per cent of reader entries were getting better returns than average cash savings rates. By the end of March, not a single reader selection was beating the average cash savings rate of 3.40 per cent and only one is in profit at all.
The ‘Yorkshire All-Share’ index covering all of our firms has dropped to 15 per cent below its starting value last summer, having been 7.2 per cent down at the end of February. It was a tough month for the likes of airline Jet2 and housebuilder Persimmon, as the war’s likely impact on inflation pushed mortgage availability and affordability concerns back to the surface for its sector.
Meanwhile, the FTSE All-Share we have been comparing it too which had been 22.4 per cent up at the end of February has slipped back to ‘just’ 13.7 per cent up at the end of March. While our virtual portfolio is not a sophisticated investment strategy you’d be likely to follow in real life, the impact of the war has hit markets and investors worldwide.
So is the lesson from this that investing isn’t worth it and you are better off having the security of holding your money in cash? I personally don’t think so.
A loss or gain on the stock market only effectively becomes ‘real’ when you sell out and crystallise it. March saw some wild fluctuations in the market, often connected to whatever Donald Trump was posting on social media about the war.
There has been controversy around suspiciously well-timed large trades that took place minutes before some of the President’s announcements but the vast majority of investors will struggle to time the market – especially when it is reacting to such a volatile and uncertain situation.
As the famous saying goes, “time in the market beats timing the market” and as I write this on Wednesday lunchtime, global stocks have been rallying as hopes grow that de-escalation is on the cards. To give just one local example, shares in Jet2 rose more than four per cent on Wednesday morning.
It is also worth highlighting that even after a difficult month, the FTSE All-Share is still vastly outperforming average cash savings rates with a very handy near 14 per cent rate of return.
While there may be a separate conversation to be had about why our region’s firms are generally struggling compared to the national picture, the wider figures do show that for those able to hold their nerve and think long-term, investing is still very much a worthwhile exercise.
Chris Burn is Yorkshire Post business editor