Investment markets and the Coronavirus

The news flow from China and around the world about the spread of the Coronavirus (CoV) has been a bit negative, and the markets have reacted relatively quickly to it, eg., the US stock market fell round 2% on Friday, Chinese shares fell 8% yesterday and NZ shares 1.5%.

The great unknown? The great unknown is that we do not know how long the 2019 CoV will run its course nor the severity/outcome, but we do know from past events, that the markets are forward looking as regards future share values and also very resilient. Note also, that we have seen similar situations with the SARS virus in year 2003 and Bird Flu in 2013 where markets recovered within a relatively short time.

Will there be a market impact? There is likely to be at least a short-term impact on economic growth (in NZ and globally) due to travel and supply chain restrictions and implications on logistical management. Thus, shares in sectors like tourism, travel, entertainment, air lines, food, and logistics, etc will likely be impacted (see above).

Will there be an impact on your portfolio? Having noted the above, any negative market events are lessened via portfolio diversification and the use of good quality managers to select stocks and bonds to mitigate such events. However, there will likely be some fluctuations, at least over the short term, especially in the portion of investments that involve growth assets like shares.

At the moment we are closely watching these events, and are in discussions with fund managers.

NB. It is sometimes in times like these that there actually buying opportunities – eg., Warren Buffet’s philosophy of acting opposite to the market sentiment!

We will keep you and/or our website updated.

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