As we sit here after close on Friday the 13th – the last three weeks have seen almost all global markets shed 25% and oil drop 50%. It seems clear global markets have caught the Coronavirus…
Let’s recap what’s happened
- Fear and uncertainty around the spread of the Covid-19 virus has reached its highest level since the beginning of the outbreak, sparking a global sell off in equity markets
- Russia and Saudi Arabia entered a price war on oil, seeing the price drop some 50%
- Central bank and government stimuli around the world including a $17.6 billion fiscal package in Australia
- National Australia Bank pulled a hybrid issue from the market – a very rare event and a sensible move, acknowledging volatility
Despite volatility valuations remain sound
We still view this as a fear and health event with a sharp but temporary economic impact.
We started this sell off with most markets (except the US) not expensive by valuation methodologies – very few extended bear markets have started from a point of fair value.
With our expert asset consultant, Tim Farrelly, we are working to run best and worst-case scenarios as to the impact on global profits.
This in turn will enable us to make assertions on how the asset class forecasts are affected.
It is highly likely this event will significantly improve forecast returns and result in a buying rather than selling opportunity… but we’ll have more on that in our next communication.
That said, volatility has returned with some serious teeth and we can’t say how long this will last.
The same messages remain: don’t be a forced seller; make sound decisions based on good advice and it should place you well in the end.