Last week’s stock market falls provide evidence of significant uncertainty regarding the economic impact to business and global economies the virus may be having. That is not to play down the social and humanitarian suffering at all, however we will for the moment focus on the financial markets. To put things into perspective and allow for appropriate consideration, consider these facts so far.
The Australian and US stock markets were openly regarded as being overpriced prior to recent falls. It was only a matter of time before a correction occurred, but the catalyst was not, until recently in sight. Despite last week’s fall of 9.5 % on the Australian market and 11.5% on the US market, both share markets remain in positive territory for the last 12 months. The US remains up by 6% whilst the Aussie market is up 4%.
The uncertainty of the impact yet to be quantified, both socially and financially is what plays on the minds of many investors resulting in a sell sell sell mentality. Whilst this is a perfectly understandable, yet a purely emotional human reaction, history has shown that those investors who start selling, more often than not fail to buy back into the market at the bottom and end up worse off over the longer term.
To try and predict the likely outcome for investors in the short to medium term would be both foolish and irresponsible, hence we again follow our long tried and trusted hold strategy. That is not to deny opportunity that may present but as a basic and fundamental philosophy this is the only sustainable approach through all financial climates.
Opportunity will present for those who are not yet fully invested to their appropriate risk/return profile, so expect we will contact you for discussion. Other opportunities may present for specific stock or asset changes in the portfolio, but we expect these to be minor.
Let’s hope the virus spread will be contained, managed and eradicated as governments together with the smartest scientific minds work toward a speedy resolution. In the meantime our thoughts are with the people and families who are the unwitting victims.
We will continue to keep you informed as events demand, in the meantime if you have any queries please don’t hesitate to contact us on (03) 9896 5100.