After two months of constant coronavirus news, financial markets have just recently started to react more strongly, with the FTSE 100 index losing £62bn on Monday.
The spread of cases across Europe, Middle East and Asia and the cancellation of tech conferences in San Francisco, Serie A football matches in Italy and a Six Nations rugby game in Dublin might have acted as triggers.
The latest coronavirus, also known as covid-19, may have spooked twitchy investors, but the message for financial advice clients is to stay calm.
Ride out short-term market noise
“Don’t try to time the markets, don’t be a forced seller,” Phil Billingham, director at Perceptive Planning, told Portfolio Adviser‘s sister title International Adviser.
Patrick Connolly, head of communications at Chase De Vere, says: “Our over-riding advice to clients is to not panic
“We run client money on a long-term strategic asset allocation basis. This means we manage risk through holding a range of different asset classes, in the right proportions to meet our individual clients’ needs.”
He adds that the firm has not been contacted by many clients, which it is “taking as a positive sign”.
But Chase De Vere’s advisers have been “proactively contacting their clients” to put their “mind at ease and remind them of the long-term nature of their financial plans and investment portfolios”.
“We are not making any significant changes to clients’ investment portfolios. We aim to ride out short-term market noise and sentiment and focus on making rational long-term decisions.”
Pandemics delay global demand, they don’t destroy it
There have been fears that trade will collapse because firms are unable to meet the demand for goods and services.
But, David Gibb, financial planner at Quilter Private Client Advisers, remains upbeat.
“It’s worth remembering that ‘pandemics’ don’t really destroy global demand; they just delay it,” he says.
“There have been nine major disease outbreaks since 1998 and, although all caused short-term economic disruption, the impact on long-term investment fundamentals was limited and economic growth subsequently resumed.
“Of course, the past cannot predict the future, but it should guide investors to focusing on long-term fundamentals when making investment judgements after an epidemic outbreak. “
IFA network Tenet has told clients that they will be at risk of missing out on longer term growth, if they are “disinvesting or delaying investment decisions” simply because of market downturns caused by the coronavirus.
Backing China as attractive for uninvested cash
The epicentre of the outbreak, China, has taken a financial battering over the last few weeks, however one firm believes that there is light at the end of the investment tunnel for the country.
Michel Perera (pictured), chief investment officer at Canaccord Genuity Wealth Management, says: “The current panic may not last for long and it should provide attractive entry points for uninvested cash.
“It’s a risk to sell and hope to buy back at the right level – the round trip is not worth it. And we think markets will recover thanks to the large Chinese stimulus.
“We are starting to see a slight tipping of the balance. When it was reported there are more cases outside of China than there are within, the markets reacted and we have seen a sharp rally in Chinese equities, while other markets have swooned.
“You can rest assured that when the virus is contained and the Chinese consumer is on the move again, we’ll see a ‘Beijing bazooka’ of a stimulus to the world’s second-largest economy.”
