As a client of Totara Wealth Management, you might be feeling a little concerned regarding the regular media talk about financial markets so we would like to provide you some context around this talk.
We are seeing a major correction occurring in all global equity markets as investors try to assess the impact of the coronavirus on corporate profits. The Dow Jones is now down over 12% from the peak it reached on the 12 February as near panic grips many markets.
The extensive factory closures and travel bans that we are seeing in many parts of the world due to the coronavirus outbreak will no doubt have a real impact on global economic activity and this will in turn impact the profits of many companies.
These types of markets, where uncertainty and fear are leading to many investors selling indiscriminately – while not that frequent – are nothing new. In these types of markets “the good, the bad and the ugly” all get sold down heavily as investors reduce their overall exposure to the equity market.
In times like these, there are a few things to bear in mind:
The correction is happening at a time when many sharemarkets around the world had reached record highs on investor optimism of continued world growth, with many stocks arguably in over-valued territory.
While the coronavirus is being taken very seriously by government authorities, so far the virus has led to around 3,000 deaths. To keep this in perspective, it is worth noting a 2017 World Health Organisation study attributed between 300,000 and 650,000 deaths per annum from the annual influenza virus.
So how does this impact your portfolio and what should you do about it?
Clearly this will be a negative month for investors with losses recorded in most sectors. However your portfolio is well diversified and designed to meet your objectives over the medium term.
It is impossible to say exactly when the current volatility will settle down.
We have been through corrections like this before and strongly recommend you remain calm and maintain a disciplined approach to investing.
Conclusion
Clearly this is a very painful period for equity investors, however most have benefited from the good gains seen in recent years. Should you have any concerns please don’t hesitate to give your adviser a call.
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