It’s funny what we miss when we suddenly find ourselves in a completely unfamiliar situation. The social distancing that we’re all living with (is it pessimistic of me to assume that we’re still in lockdown when this article goes to print?) means that my usual weekly routine of travelling around the country has become a distant memory.
A long weekend city break has been the preserve of many a traveller and with that comes the ability to indulge in the cultural offerings of the chosen destination. Many of us have packed our bags to immerse ourselves in the culinary, architectural and cultural experiences of cities, both domestically and internationally. However, the onset of travel restrictions, coupled with the uncertainty overshadowing travel post the current crisis, have made this previously easily accessible pastime something that we can only look forward to, or reminisce about. Or could there be another way?
Many of us are familiar with the opening line of the Charles Dickens classic, A Tale of Two Cities, with the words ‘it was the best of times, it was the worst of times’. Until recently, investors have been experiencing the best of times. The fear and uncertainty of the coronavirus pandemic (COVID-19) has rapidly changed this view, with markets erasing multiyear gains, resulting in many investors experiencing the worst of times.
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Following the significant increase in volatility in financial markets related to the coronavirus outbreak, there has been an increase in pressure on all asset classes including the UK commercial property sector.
With markets reeling from the effects of coronavirus, Schroders’ Group CIO highlights what investors should focus on.
Coronavirus is the latest threat to market harmony that once again poses a timeless question: how should investors act in a crisis?
The impact of the Coronavirus together with the sudden sharp fall in the oil price has raised serious concerns in financial markets that a significant economic downturn has now started. For markets, the critical question will be at what stage investors feel the situation is being brought under control. In the case of the Coronavirus, this will be primarily from a medical perspective, but from an economic perspective it will be when the consequences of both the virus and fall in the price of oil can be clarified. We will address these issues in this note.
Whilst the headline news on markets is clearly negative, for longer-term investors looking for a potential entry point, the key to markets may be less pessimistic news, as the delta of change typically drives market direction. This won’t be related to deaths, which are a lagging indicator, but to when new cases peak. The best estimate is that the spike is still at least a couple of weeks away. However, both in China and Hong Kong, there is reasonable evidence to suggest that containment measures are working and that the situation has an element of control.
