Since the start of the year news headlines have heavily featured the outbreak of the coronavirus in China. The virus has had the effect of stopping flights, slowing trade and prompted the building of a new hospital in record time.
Epidemics like this can quickly unnerve investors and potentially affect economies and businesses and as financial planners and wealth managers we want to know what it means for our investment portfolios and clients?
Despite the outbreak of this virus we remain committed to our long-term investment philosophy and we feel there are some key points to highlight to clients.
- Although harmful to the unfortunate people who have contracted the coronavirus, from an investment perspective this type of “event” is fairly common.
- Investors tend to react to epidemics, but the long-term picture is positive. Morningstar, an investment data and research company, has studied the subsequent investment returns after the outbreak of similar epidemics in recent years (SARS, Swine Flu, Ebola, Zika etc) and concluded that investment markets typically recover quickly after an epidemic is reported.
- Our direct exposure to Chinese stocks is very low across our portfolios but in any event, we still expect these holdings to deliver positive outcomes over the long-term.
- Investment markets are efficient and will quickly adapt to seek out new opportunities
Our conclusion is we remain confident in our portfolios and will not be making any significant changes in the short-term and hope our clients remained disciplined enough to sit tight for the time being.