Coronavirus & Market Update

As you are all aware the spread of the novel coronavirus (COVID-19) continues to escalate outside China despite the concerted efforts of many governments, communities and the World Health Organisation (WHO). Overnight the WHO declared COVID-19 as a global pandemic. This is the official recognition of the severity and risk the disease poses to the global population.

There has been considerable commentary comparing COVID-19 to the normal Flu season, and while on the face of it the fatalities are not markedly different, COVID-19 is proving to be very contagious and has a significantly higher mortality rate with the old, the infirm and the very young. So, while the risk to the young and/or healthy is well below 1%, it is the contagion risk to the more vulnerable groups of society that has exacerbated the risk posed by COVID-19 and hence the magnitude of the global response. In addition to the declaration of COVID-19 as a global pandemic, President Trump’s announcement this morning banning all travel from mainland Europe to the US for 30 days and the overall panic-driven behaviour in our society further contribute to the potential large-scale impact of COVID-19.

The rapid spread of the virus and the escalation of the containment measures, such as the ongoing closure of workplaces and schools, the imposition of travel bans, and other related restrictions, have already had an economic and social impact. Developed world share markets are now in bear market territory (a fall from a recent high of over 20%) and quite reasonably people are worried and looking for guidance.

As we have stated in previous communications, we have no crystal ball and after two weeks of heightened uncertainty there is no apparent end in sight. But this will end at some point, though we expect it to get worse before it starts to get better - but get better it will.

Many are worried about the capital in their portfolios and that is completely understandable. There is no doubt that in aggregate, corporate earnings have been negatively impacted by this event. Market reactions have in part reflected this but also expressed the panic and fear of many investors.  What history has shown us from an investment perspective is that holding the course at times like this, while uncomfortable, has over the longer term proven to be a good strategy. And in the absence of reliable foresight we believe, as uncomfortable as it is at this point, maintaining your strategy and rebalancing to your respective risk profile asset allocation remains appropriate, as it is a proven process.

Finally, we hope that you and your loved ones manage to avoid COVID-19 and that our community and markets can return to normal as soon as possible.