Coronavirus: a reason to abandon equities or an opportunity?
New global figures reported this week, together with the recent outbreak in Italy, indicate it is increasingly difficult to contain the Coronavirus. Investors have been digesting the impact of Coronavirus for over a month, hoping it would be contained, but a pandemic now seems likely.
Markets overshoot or undershoot on news flow, too excited or too fearful – it is their nature – and markets took a hit this week. Very short term trading (Hedge funds and day traders) may well be brutalised by the markets over the next few weeks, with relatively huge financially breaking swings in either direction possible.
Long term investors, however, should maintain a detailed watching brief, because the current falls provide excellent opportunities in the transportation sector, airlines, shipping, etc.
Also, due to very low central bank interest rates, which show no signs of disappearing, indeed will be forced lower by a global slowdown caused by something like Coronavirus, equity valuations are well supported and not overly rich now or prior to Coronavirus. Nothing has changed other than an equity buying opportunity has been created for long-term investors. The issue is timing as ever, hence the call to keep a close watching brief. In this situation, in our view, long-term investing strategies in equities is the way to make rational super-normal returns.