With all the noise around the Coronavirus and its impact on equity markets, it’s no wonder volatile conditions have returned.
The broad sell-off in recent days has been based on the levels of fear and uncertainty that has gripped the world markets. When these events occur, there is no discrimination in the type of stocks that get sold off. The good assets get sold along with the bad.
From the highs in mid-February to falls we have seen in recent days, short-term market movements indicate the behavioural response to fears of short to medium-term economic activity levels. Although the human knee-jerk reaction to negative economic news is nothing new, it is likely that there will be an eventual rebound in activity levels once the crisis is over and life returns to normal – with less fear and uncertainty.
Whilst markets will continue to fluctuate as new information becomes available, there will also be opportunities that arise from the current sell off and certainly some asset classes that will continue to shine during this period. Of course there will be some companies that are impacted more than others, i.e. tourism and travel companies versus toll roads or energy companies (infrastructure). In saying this, these tourism / travel companies have strong balance sheets that can assist them to ride out this wave.
China is currently entering a period of containing the virus with Chinese employees now starting to go back to work. Goods are once again being shipped around the world. This coupled with current monetary policy of lowering rates, with bankers now looking to further reduce rates to stimulate the economy, will ultimately lead to cheaper money and the need to find assets that can provide a better return than nil interest bearing accounts.
This may come over the course of the year.
In conclusion, this event is not the next GFC as there is no structural impact to economies as such at this stage. As stated above, life will return to normal and markets will continue their roller coaster journey – as they always have.
Finally, remember to remain focused on the long-term objectives as often short-term volatility provides good opportunities for future wealth growth.
This blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individual’s personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.