z-kolkiemz-kolkiem

Coronavirus: an investment update

Events on the weekend of 7 and 8 March resulted in markets reacting violently. James Robertson explains our response and investment positions.
Share on facebook
Share on linkedin
Share on twitter
Share on email
Published 9 March
2 mins

With around 115,000 cases in over 100 countries, almost 4,000 deaths, and trading on three US indexes halted for 15 minutes on 9 March, what was originally touted as a ‘bad case of the flu’ is regrettably contagious enough to cause major problems for markets and societies. 

The COVID-19, as caused by coronavirus, is proving to be a phenomenon that is difficult to understand in almost every way. You will have no doubt heard that it’s a mild illness for some, that only 1% of people will die…but also that it’s going to overwhelm health services, cripple economic growth and end the equity market bull-run. Some of these things may prove to be true, but they also may not. It’s essential to keep in mind that we can only ‘know’ these things while assigning a given level of probability to each. Of course, that they may also not be true means that they might be ‘wrong’ – a little or a lot.

 

What we do know is that this is an unprecedented set of circumstances, which means that the ability of anyone to make reasonably accurate forecasts about the disease and its repercussions with any degree of confidence, beyond the immediate future, is extremely limited.

 

At the same time, the nature of the outbreak is such that the more pessimistic forecasts – based on the uncontained spread of the disease – involve exponential transmissions to new patients. The problem in understanding the impact of something with exponential growth is that any error in the assumptions used can cause enormous differences in outcomes. In addition, we can also anticipate that disruptions of everything from medical supplies to consumer demand to supply chains will cause a feedback effect, further distorting forecasts and creating a vicious circle.

 

Other unexpected things can and will happen. For example, Saudi Arabia’s recent decision to discount crude prices and raise production in the face of Russia’s reticence to reduce production to maintain prices with the rest of the “OPEC+”. Events like this can further shake confidence and cause traders to sell even more when there simply aren’t as many buyers around – when assets that previously appeared to be liquid suddenly have fewer buyers, it causes volatility in markets that is itself making headlines.

 

So there are two types of unknowns. The first is the virus and its interaction with our global community, and the second is how that global community responds. It is possible that a coordinated fiscal and policy response from global governments could prove effective – creating a virtuous circle.

 

So, given a difficult mix of unreliable forecasts and no reliable model on which to base our expectations, what action should we take?

The main response is to stay focused on our investment process, because it is designed to weather such storms, and we continue to believe it is working. We are valuation-focussed investors, guided by the principle that the price paid is an important determinant of future returns.

 

Our own investment research had shown the valuation of stocks had been inflated for some time and well before the impact of coronavirus was felt. Our portfolios entered this crisis with a lower than usual allocation to stocks. It may be that we see prices drop enough to justify expectations of above average returns ahead, and which may then lead us to increase our stock allocations. Meanwhile, as well as a higher-than-normal cash position, we also have highly-liquid fixed income positions in the portfolio, which we could use to fund increased allocations.

 

Equally, however, we may not, since our portfolios are based on the ever-changing balance of probabilities. As information changes, we also reassess our plans with the perspective we bring as experienced and professional investors and the confidence that our strategic asset allocation gives us the breathing room to make considered decisions that deliver returns over the long term.

 

We remain confident that our strategy is robust, that our clients’ assets are safe and invested in liquid highly-regulated and transparent investments. We are also committed to protecting clients’ capital and that we believe each is taking an appropriate level of risk given the wide range of risks, and opportunities, that are out there.

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Investments can go down, as well as up, to the extent that you might get back less than the total you originally invested. Exchange rates also impact the value of your investments. Past performance is no guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios. They are referred to for information only and are not intended as a recommendation, not least as they may not be suitable. You should always seek professional advice before making any investment decisions.

about the author

James Robertson

James Robertson

Based in our Isle of Man office, James is responsible for delivering the end-to-end investment management process, overseeing the implementation of the Nedbank Private Wealth house view within our discretionary managed portfolios, and for developing our investment proposition.

 

He has over 18 years’ investment experience and has been responsible for the Nedbank Private Wealth managed discretionary portfolios since 2007. James holds the Certificate in Investment Performance Measurement from the CFA Institute.

Access more of our insights

Investing

The week in review

20 Apr

   |   2 mins

Looking back at events and financial markets during the week of 12 April, we review the publication of positive economic data and developed equity market outperformance (with the exception of Japan) in the past 30 days.

Investing

March's investment market commentary

14 Apr

   |   3 mins

March, as with the quarter as a whole, posted strong returns for riskier assets. Equity markets continued their rise, albeit with some notable sector rotation along the way, which Tom Caddick’s update explains.

Investing

The week in review

13 Apr

   |   2 mins

With the International Monetary Fund stating that most advanced economies will emerge from the pandemic with little lasting damage, as they have proved more resilient than many expected, we look back ad events and financial markets during the week of 5 April.

Investing

Quarter end investment webinar: opportunities and threats for investors

8 Apr

   |   45 mins

David McFadzean was joined by Tom Caddick to talk through the investment trends from Q1 2021 in financial markets, how these might continue to impact investors and what that meant for portfolios in a session moderated by Karen Bennett.

Get in touch

If you are interested in becoming a client, please complete the form via the ‘become a client’ button below. Alternatively, if you are already a client, or if you have a question about how we help clients in particular circumstances, please use the ‘contact us’ button.


We will get back to you as soon as we can during office hours, which are Monday to Friday, 8am to 8pm (UK time), except for UK public holidays.

Become a Client

Thank you for your interest in Nedbank Private Wealth. Please call us on +44 (0)1624 645000 or complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.  Please note: If you are an EU resident, we are unfortunately unable to offer our services to you at present.

* Required fields

Contact Us

Give us a call today on +44 (0)1624 645000 or please complete the requested information and one of our team will get back to you soon. We look forward to speaking with you.

Our office hours are weekdays from 8am to 8pm UK time, except for UK public holidays.

* Required field

Search suggestions

IMPORTANT

Beware of scams using Nedbank Private Wealth’s name.

 

Have you received an email or SMS claiming to be from Nedbank Private Wealth, inviting you to open an account?

 

Don’t be tricked – Nedbank Private Wealth never contacts members of the public directly, and will never use email or text messages to ask you for your bank details or sensitive personal information.

 

We are aware of scams using our name and those of our staff. These are usually intended to convince you to send money to the scammers, who use our name because it sounds legitimate.

 

If you are in any doubt about whether an email or SMS in our name is legitimate, please speak to your private banker, or call the telephone numbers on the “Contact us” page.