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February Update – COVID-19

12th February 2020

February Update – COVID-19

On the 8th of January 2020 I wrote for the yearly outlook:

“There will also be the unexpected, random unknown unknowns”

We are witnessing such a random event in the form of the COVID-19 outbreak (commonly known as the Coronavirus) The spread of such, amplified across multiple continents, countries, and regions is a genuine concern from a human point of view as well as economically and financially.

The global economy was expected to grow by 3.3% this year. This is already looking far too optimistic with 2% or even sub 2% more realistic now. UK economic growth for 2020 was looking to be around +1%. However, it is now clear, as things stand, this will be less than 1% this year. A mild recession is also possible even probable.

This virus shock has significant supply and demand level attributes – we are already witnessing some of this in terms of travel, spending and supply stockpiles. More of this will occur as we progress into March and the virus spread travels away from China and Asia into the West and Africa. I do not want to speculate on what could happen in any scenarios – there is plenty of news and noise out there. There will be an impact, and this is reflected in financial markets behaviours.

This week stock markets globally had a significant slide; markets have fallen by more than 10% in many cases. Fear and panic has gripped many investors. There has been a major correction and a significant stock market crash cannot be ruled out. Often these things become self-fulling as investors and consumers consider the new perceived reality. Being rational and sensible is important.

As in everything, things will settle down. Markets will start to behave rationally again: governments, health agencies and the pharmaceutical industry will get a grip on what is going on and act fast and act decisively. When exactly this will happen, we do not know, but it will happen.

We are long-term investors. We are patient, calm investors. We do not care too much for short-term market gyrations. We pay attention to such movements, but we prefer to see such volatility through for the benefit of capturing long-term gains for clients. In the long-term there is a clearer picture, trends are better established, and importantly investment returns are moved by fundamental and reality. This is a very disciplined approach to investing and now, more than ever, discipline in required.

We remain committed to our investment strategy this year and are committed to adding value to client portfolios in any market scenario.

Please do get in touch if you want to learn more about what we do.

Saftar Sarwar
Chief Investment Officer
28 February 2020

By making an investment, your capital is at risk. The value of your investment depends on market fluctuations outside of our control and you may get back less than you invest. Past performance is no indicator of future performance.