Coronavirus Fears Impact Markets

  • Steve Tuttle

As coronavirus concerns hit markets, Steve Tuttle reviews why fears may be overblown, and could lead to opportunity to enhance returns for long-term investors.

           

The coronavirus outbreak creates some near-term risks to investors.  However, previous episodes of viral outbreaks suggest markets may snap back fairly quickly, and the longer-term impact on global growth may be minimal. As such, the coronavirus outbreak does not fundamentally change our outlook for global markets at this time. Consequently, we emphasize sticking to the plan, by focusing on the long-term and maintaining a strategic, diversified portfolio.

The impact of previous viral outbreaks like SARS on economic activity appears to peak after roughly 1 to 3 months.  Goldman Sachs published a study that benchmarked the current outbreak against 4 recent viral outbreaks.  While each episode is different, recent history suggests a 2-part pattern:  first a rapid acceleration of concern (over a couple of weeks); then a gradual fading out of this concern (over roughly 2 months).  While there is no guarantee that the coronavirus will follow this pattern, recent history suggest we may be nearing the end of the phase of accelerating concern.  As concerns dissipate, this may prompt a modest recovery in market prices.

That said, there are risks of more downside until the outbreak is contained.  When investors become nervous and market behavior focuses on the short-term, this is where experience and an ability to see through short-term market movements can become advantageous. 

We are comfortable that our portfolios can weather more volatility, and we are ready to act if we see opportunity.  However, given the risks and return potential as we see them, we remain patient.  We believe this discipline gives us an edge that has enabled us to meet our clients’ objectives over time.                

IMPORTANT DISCLOSURE

Past performance may not be indicative of future results. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions. Any forward-looking statements, information and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain and actual events or results may differ materially from those reflected in the newsletter. Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice. A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel and operations are available upon request.

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