Will Coronavirus be the nemesis for investors in 2020?
Its only two months into the start of the financial year and we have already seen the bushfire crisis followed by floods and these two dramatic events are sure to affect local share markets and communities for a long time to come.
However, what was not foreseen was this unknown coronavirus that reared its head out of Hubei, China in December. This has certainly now placed all the worlds health authorities on high alert as everyone is trying to understand this epidemic and contain the spread of the virus around the world.
Over the last two weeks we have seen major corporations, including Apple disclose to the markets potential profit impacts to their bottom lines and the flow on affects have been staggering. Just this week alone, we have witnessed the biggest plunge in global stock markets since the financial crisis, amid rising fears of the impact on the world economy and the efforts to contain the virus.
As world markets tumble in the wake of the coronavirus epidemic and low growth expectations, there is a lot of uncertainty in the marketplace. This was very evident when global investors this week rushed to buy assets considered “safe havens” including government bonds and gold, sending the yield of the US Treasury bonds to the lowest level on record.
These economic reactions are commonly called, “flight to safety” and is a financial market phenomenon occurring when investors sell what they perceive to be higher-risk investments and purchase safer investments. And as we have seen, this is considered a sign of fear in the marketplace, as investors seek less risk in exchange for lower profits.
Taking a breath and resetting your investment strategy is never a bad plan especially when there is a lot of uncertainty in the short term.
Like all businesses, our board and investment committee have reviewed our potential exposure to the coronavirus and are comfortable that our investor returns of 6.5%pa will not be impacted in any way due to our Australian domestic exposure, no currency exposure and Australia’s isolation to the rest of the worlds markets.
Skyring has always maintained its view that we are the conservative portion of clients’ portfolios and the lever that delivers the consistent income for lifestyle outcomes for our clients.
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