Coronavirus – Update on our thinking
4 MARCH 2020
The extent and impact both short and long term of the Coronavirus and its impact on markets continues to be an evolving situation. At the beginning of last week, we were under risked in some of our portfolios and the market sell off has led to an opportunity to increase risk, or in other words, buy attractive assets at discounts. The important line we follow is not to make knee-jerk reactions and maintain our disciplined multi-asset approach which has reduced the impact on most portfolios.
We have made no changes to our asset allocation or fund selection on the back of this. It is a fluid situation with a market rally over the last couple of days as Central Banks publicly stated they would step in to support the economies in what is the first nonfinancial cause of a downturn since the OPEC supply shock in October 1973. This was after the market suffered a strong sell off last week on the back of worries within (this is not an exhaustive list); airlines, travel and leisure and anything related to the Chinese supply chain. As it stands it is too early to make large adjustments. There is positive news from China in that the figures, (if they are to be believed), show that the infection rate is slowing. Worries that Corona Virus has spread to the middle east and the pace with which it has reached Europe, particularly Italy is a growing concern. We will know more in the next two to three weeks. The major fear, apart from the obvious well-being of the population, is does this create an equity bear market? Companies will use this to ‘kitchen sink’ all bad news. However, a resolution over the next month would see short term implications but should also provide a relief rally. As you would expect, we are monitoring the situation and if the situation turns for the worse and we change asset allocation we will of course keep you informed. A prolonged downturn would see us change our allocation and this would lead to inevitable buying opportunities.
Last week saw us making new strikes on structured products as volatility provides some good pricing opportunities for us as well as picking up attractive secondary market products.
As developments unfold, we will of course keep you updated, however if you have any specific questions, please do not hesitate to contact us.
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