Coronavirus – what are the Investment Houses saying?

Anthony Murphy


Posted on: 6th March 2020

The latest 2020 buzzword is certainly making an impact on global equity markets as investor err on the side of caution as they fear global growth and corporate earnings will be impacted leading to a significant sell-off and the worse week on the global markets since the 2008 financial crash.

Given that Covvid-19 is affecting everything and everyone from panic buying hand sanitizer to the possibility that the Tokyo 2020 Olympics may be affected, our investment providers have given their view on the markets;

SEI

“Investing is usually a long-term venture. And history has shown time and time again that when markets stumble into negative return territory, they have always gone on to reach new heights. Resisting making short-term emotional decisions is essential to reaching your long-term goals”

Investec

 So how do we navigate such difficult waters? We must start with a clear understanding of our investment positioning. Our judgment is that from a public health perspective, the issue will be capably and successfully addressed over the coming quarter and that the negative impacts on global growth stemming both from inevitable (and possibly extensive) “quarantining” will be temporary and quickly recovered.

The response of the governing authorities and the medical profession also gives grounds for optimism. The outbreak in China is now subsiding but the stealthily infectious nature of the virus (asymptomatic carriers can pass it on) means that the outbreak is now rapidly becoming global in scope. The lessons learned in China will help as new clusters of infection are identified and the combination of increased awareness, effective testing and the practice of normal infection-control hygiene are expected to be successful in stemming the tide elsewhere. On a longer-term view, lead vaccine candidates have already been identified so that a vaccine will enter human trials well before the end of this year.

From an investment perspective, however, experience suggests that stock markets look past one-off events and there are good reasons to believe that this will be the case again. Specifically, the foundations of the world economy are strong, with consumers, corporations and the financial system all in robust positions to absorb the shock.”

Parmenion

These growth assumptions are now being pulled back, quite materially in certain countries such as China.  Yet most economists assume the disruption will delay rather than derail economic growth. The virus is expected to peak sometime in the second quarter, indicating only a temporary slowdown.

The critical element for investors is trying to ascertain the severity and duration of the slowdown. This is notoriously difficult.  Many look to history as a guide, noting the V-shaped recovery following the SARS crisis in 2003, or the Zika outbreak in 2016.

The problem with that is, firstly, no two viruses are the same. Secondly, China’s impact on the global economy is far greater today than it was in 2003.  China now makes up around a third of global growth, and global manufacturing supply chains are much more integrated. If China catches a cold, so may the rest of the world.

Speak to us

The overwhelming theme from the three investment providers above is that this is temporary and, seen as investing in the market is a long-term venture, investors should ride the volatility wave as stock markets recover and to avoid cementing any losses that you may be experiencing.

Why not seek financial advice from the experts? We pride ourselves on securing client’s financial futures and help clients understand their investments to help them make the correct decisions for them! Get in touch to see if one of our Financial Planners can help you help yourself.

Investment provider comments taken directly from their communications and any opinions expressed are not the opinions of Haven IFA. This blog does not constitute financial advice. Investments can go down as well as up and you may recieve less back than you originially invested. 

Important Notice


Haven IFA proposes to continue to provide you with an ongoing advice service during the unprecedented times in which the world finds itself due to the Covid-19 pandemic.

Read More