As news breaks of more cases of coronavirus being confirmed in Europe and other parts of the world, global stock markets have spiralled this week in anticipation of the potential effect on the global economy. Equities around the world have fallen sharply as traders start to consider the broadening of the issue from a China and Asia focussed problem to one which has more far-reaching scale around the world.
This means that the disruption wrought by the virus potentially will be more prolonged than investors had hoped and as such has the potential to affect companies’ earnings and slow economic growth for longer than previously anticipated.
At SG Wealth we are watching the situation closely and of course considering how best to react with regards to our portfolios that we manage. Clearly this is a developing concern which may get worse before it gets better, however clients should be assured that hopefully like other global outbreaks authorities will be able to get this under control in due course via the synchronised measures they take, the development of vaccines (which technology now allows us to do quicker than ever) and we expect the world should return to some sort of normality in due course. We also expect central banks and governments to act with supportive monetary and fiscal measures in due course to help mitigate the impact on the global economy.
In the meantime we will expect continued volatility – both up and down – in markets as news flow develops and investors try and anticipate longer-term impacts for companies. As ever with such things the first message to our clients is not to panic but stick to the principles of long-term investing, as turning points in markets come around quickly and can be very easily missed. Often by missing the early part of any recovery by trying to “time the markets”, investors lose out on the best part of returns.
Our portfolios in general have been positioned relatively cautiously now for some time, indeed back in late summer last year we reduced risk in our portfolios further from an already quite cautious position, towards the bottom of their ranges. We have therefore been relatively comforted over recent days that our portfolios have cushioned investors from the worst of the falls in global stock markets. We also took some further steps earlier this month to add further diversification of risk into our portfolios. We hold elements in most of our portfolios which will perform inversely to equities and as such will be helping to balance off some of the falls we have seen in share prices.
We will continue to monitor the position at all times and be prepared to take further action if we deem it necessary, either to further shelter from risk, or indeed to look to start to take advantage in the current weakness in share prices in readiness for any reversal of these falls. The managers of our underlying funds of course are also applying these active management principles and working hard for our clients to make the best of the current situation. Please feel free to contact your individual Wealth Manager should you wish to discuss your own position at any stage.