With global news headlines dominated by the spread of COVID-19 (or as it’s more commonly known, the Coronavirus) it was inevitable that the bottom line for businesses would be affected. As usual, it was not long before investors began reacting, with equity markets across the globe experiencing double digit falls by the close of play last week as many investors started withdrawing their funds.
As more and more patients are diagnosed in Europe it is undeniable that the spread of COVID-19 is exceeding the previous outbreaks of SARS and Swine Flu in years gone-by. However, as is quite often the case with these snap reactions in the markets, some sense of perspective seems to have been lost amongst the hourly updates on the number of people infected and the threat of escalating measures to try and curtail the spread of this latest strain of flu.
Since the summer of 2019 well diversified portfolios, such as those we recommend to our clients have experienced extremely strong gains with many of the top market indices reaching new all-time highs in the first few months of 2020. As such, the “record breaking falls” over the past week have been amplified by the altitude at which markets sat at the start of the week.
Time is a fantastic healer and it is highly likely that the spread of Coronavirus will eventually lose momentum as we enter into the warmer Spring months, with China already starting to report a decline in the number of new cases being diagnosed each day. Once the dust settles and quarantine measures come to an end, the lasting impact on the fundamentals of businesses across the globe is likely to be minimal and markets will begin to recover as opportunities arise for value investing appear.
We continue to believe in our investment philosophy of retaining well-structured and widely diversified portfolios that will be well placed to profit from the inevitable recovery that will follow the pandemic. We would also stand by our belief that attempting to try and “time the markets” by disinvesting now before reinvesting at the “low point” of the market is not advisable as time and time again this has been shown to harm long term growth more than it will help it.
If you have any further queries regarding the situation, please do not hesitate to contact your adviser who will be more than happy to discuss our view in more depth.