Market update – Partners Private Wealth

Authors: Sam Adams and Glen Orbell

MARKET UPDATE

We are sure you are aware that share markets are again making headlines due to falls in recent days. As of this morning (Friday, 28 February 2020) these falls sit at around 12% for global benchmark indices, measured by the US S&P 500, in only 7 trading days.

As investors it is natural to feel concerned and uncomfortable.

However, placed in context this simply means equity markets have given up the last 4 months of gains and are now back at the level of October 2019.

This is investing!

In fact, the average intra-year fall in markets is 13.6%. Despite that Share markets have historically increased 4 in every 5 years.

If you believe the mainstream media, which you know we are sceptical of, the coronavirus is the sole catalyst for the weakness.  Whilst it is true that this virus is going to have an impact on economies, in our opinion and experience, the current market volatility is unlikely to be one specific action or event but a combination of several factors.

These include (but are not limited to):

  • the coronavirus
  • some profit taking after significant returns in recent years
  • risks relating to upcoming US Elections
  • ongoing political uncertainty around the world and slowing global economies.

Coronavirus

Coronavirus – now named Covid-19 by the World Health Organisation – was declared a Global Health Emergency in late January. But up until this week, equities had taken the risk in their stride.

Historical viewpoint

Sars, Ebola, Swine Flu, Zika – these are just a few of the 10 significant global disease outbreaks we have had since the late 1990s, and whilst the latest Coronavirus threat is equally or more serious than many of the previous disease episodes (covid-19 death rate is estimated to be 2,500 people for every 100,000 infected) markets have bounced back each time.

Market Reaction

“Market participants tend to react to such unforeseen outbreaks, but markets tend to recover by the six-month mark”.  “This suggests that sentiment drives early losses, but sustained economic impacts are less (than) perhaps investors’ fears at the onset.”

Morningstar investment analyst Carolyn Szaflik

Summary

We expect most of these risks to remain for some time and thus the usual ups and downs are likely to continue.

High quality, well diversified portfolios holding cash, fixed income, equities, property and alternatives remain the prudent course of action when investing over a medium-long term horizon.

Regular review of client portfolios and discussions around individual objectives and risk tolerance will continue throughout this year.  In the meantime, feel free to contact the office if you wold like to discuss your investments specifically.

Warm regards

Sam Adams and Glen Orbell

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