It’s been a difficult week for global stock markets, as investors assessed the economic impact of the coronavirus spread outside China. While we know it can be troubling to see the markets fall in value in the short-term, now is the time to stay composed and objective and to focus on long-term performance and not the news headlines.
When stock prices are falling over a matter of days, it can test anyone’s resolve but it’s important to keep the bigger picture in mind as periods of instability may be good for long-term investors.
Experienced investors have lived through many dips as market corrections often happen. However, this latest fall has not been caused by economic reasons, but will have economic implications. It’s a matter of how long the situation will last, but with every fall, over time, markets have always bounced back.
We are confident that developed economies will take the necessary precautions to contain the virus. There is more concern about developing and emerging markets, which may not have the health infrastructure to deal with the situation as effectively.
Coronavirus has already significantly impacted business travel and aggregate demand by disrupting supply chains. As the Northern Hemisphere heads into spring and summer there is a likelihood that the contagion of the virus will taper off in warmer weather. We are taking this seriously and understand that markets may weaken further before they get better.
However, rather than trying to predict the market’s moves in the short term, investors can be better off by remaining disciplined and sticking to their plans.
For our long-term pension portfolios, our strategy remains to stay the course as we generally invest with a multiple decade perspective. We are diligent in ensuring that the risks of our client portfolios are commensurate with the risk capacity, risk tolerance, and time horizons of our clients. Our focus remains on managing costs for our clients tightly as we understand the long-term impact of costs on net returns.
There has been a flight to safety as gold hit a 7-year high and US 10 Year Treasury Yields dropped to a record low. There is certainly a possibility that central banks will provide a coordinated effort to stem any further losses. It is a time for investors to be rational, calm, and collected. We do not believe that such a correction will have a long-term effect.