Coronavirus – What’s the true effect on the markets?

With the ongoing news on the spread of the Coronavirus and its effect on the global economy, it’s understandable that many investors are concerned.  

No official response  

We have yet to see what the official response will be from central bankers although there are encouraging noises and it seems the markets believe that action will be forthcoming, plus fiscal stimulus from government. If that does in fact transpire, the virus does not become more virulent and warmer spring weather reduces its ability to spread, then we may have had a significant economic stimulus and markets could recover quite quickly. 

We don’t as yet have enough reliable information to know just how bad the virus will be in terms of human lives and economic fallout, but if these events do have further impact, all of our portfolios here at TPO are structured with diversification at their heart. The media headlines tend to focus on risk markets when they fall, but not on our ‘fear’ assets, such as gold or other alternative investment assets that hopefully act as a brake on any downside risk when shocks such as this happen in the market. 

The facts so far... 

As an example, the US S&P fell -11.63% and the MSCI United Kingdom fell -8.2% between Thursday 20th February and Thursday 27th February, whereas our Preferred Portfolio AA I and AA II fell -2.74% and -4.52% respectively. These two portfolios are cautious within the risk corridors that they operate in and provide downside protection when there is a correction in the markets. AA I and AA II constitute of 34% and 26% respectively in alternative investment strategies. These assets are primarily designed to act as an insurance policy when the core elements of the portfolios are under distress. 

The importance of understanding your risk appetite 

The Private Office is an advisory led planning business, so the majority of our clients should have the right risk for their investment timescales and therefore should not be overly worried about the bumps in the road.  The initial numbers demonstrate that we still take great care over these bumps.  

Should you have any concerns of course please feel free to contact us on 0333 323 9065 or speak directly to your adviser.