We are only several weeks into 2020 and we are now faced with a significant level of uncertainty and volatility in global equity markets due to Coronavirus. This particular strain of flu, named COVID-19 by the World Health Organisation, originated in the People’s Republic of China and is now appearing across the wider world.

Clearly, all media outlets are transfixed by the issue and we would expect ongoing volatility until we gain some greater understanding of the outbreak, news on a potential vaccine and some certainty for markets to stabilise. Presently, markets are trying to price in the unknown effects of COVID-19 becoming a global pandemic.

Severe bouts of volatility are not uncommon for global equity markets and our ‘normal’ course of action is to remain fully invested to benefit from our long term positioning and meet the objectives for investors. To this regard, we feel that it is important to put some context to the new virus, whilst not downplaying the severe risk to health.

COVID-19 is serious but appears to have a much lower mortality rate than previous global outbreaks. For example, SARs in 2003 (Severe Acute Respiratory Syndrome) and MERs in 2012 (Middle Eastern Respiratory Syndrome) had 10% and 30% mortality rates respectively. COVID-19 on the other hand is around the 1% level in developed countries.

Our natural style of investing focuses on long term sound investment opportunities, rather than trying to time short term ‘events’ which in our view adds even more risk and fighting against natural tendencies to keep waiting for a better re-entry point. Within our portfolios, we do also have exposure to fixed interest securities/cash, depending on the risk profile, and this provides some dampening of volatility and portfolios therefore are not exposed to the full falls of global equity markets.

We will continually revisit our thinking on the current situation and will keep clients informed should our position change. As mentioned earlier, these periods of volatility are not uncommon and the recent falls have taken back some of the strong returns achieved during 2019. Our experience of many previous episodes helps us in trying to remain focused on our objectives and hopefully steer our clients through this latest event.

The Boolers Investment Committee