Whilst the virus has been in the news since last year, as the coronavirus was generally contained to China, markets had largely ignored it until this week when news emerged that it was spreading more quickly to the “developed world”. This has then fed through to markets this week resulting in a sell off in all the world’s stock markets.
Whilst the virus is spreading fast, the facts remain that it appears only marginally more dangerous than flu and with Governments reacting in dramatic fashion this is now having an economic effect. The largest risk to your investments will come from a large and prolonged shutdown. What do we mean by this? For example, Chinese ports are current shut for exports so shops like Primark and importers like Jaguar/Landrover for example are warning about imminent stock shortages of up to 20% as a result! This has the potential therefore for China to “export a recession”!
Our view is that this will result in temporary disruption to the supply chain and once treatments and understanding of the virus becomes more effective, concerns will dissipate to a quick recovery. In the meantime, moving money away from equities into defensive fixed interest securities and gilts is sensible.
As always, get in touch with your local experts whom will keep abreast of all market developments and build your very own Financial Fortress!