Hoping that you are well and that your family isn’t impacted by the current medical crisis in parts of the world. It is a medical crisis and our thoughts are with families suffering because of illness or confinement. It will have some real impact on our economy as our exports will be slowed and some overseas-made goods will be in short supply. However, it is mainly a medical crisis, and unlike the the financial crisis that was the GFC, the impact on the financial markets should pass fairly quickly.
John Abernethy of Clime Asset Management describes the current media sensationalism: “the current equity market correction, driven by the coronavirus has given rise to the rerun of classic headlines like “Billions wiped off equity markets”, “Blood in the gutters” and the well-worn “Panic selling by investors”. (However the use of the name) “investors” rather than “speculators” gives the impression that rational people are frantically giving up their long-held investments and therefore you should too! The economic and social disruption caused by the coronavirus will continue for many months. However, whilst I will not claim that there is never a good time to sell equities and re-allocate to other asset classes, I categorically believe that there is never a good time to panic and sell equities. Equities (and never more so than today) offer exposure for investors to benefit from long term world growth.”
Miriam Herold (head of Research at Centrepoint Alliance) writes “that global equities were close to record highs just a few weeks ago and volatility has been well below historical averages. Market corrections should be considered a normal part of investing. (A stock market correction is defined as a fall of at least 10%). Although the precedents for coronavirus are limited, the lesson from the SARS epidemic, are that markets usually recover and will tend to bottom out around the time when peak cases start to decline. (SARS started in Asia in 2002 and) new global cases for SARS peaked around May 2003, and share markets bottomed around this time”.
This is a reminder to have faith in your Investment Approach and to maintain sufficient amounts of cash so that there is no need to sell assets when markets correct.
Wishing you a good month ahead.
Tom, Maria and Kerrie
at Financial Springs