It is apparent that Coronavirus is causing ripples in the stock markets as the impact of productivity in China and restrictions on travel are being felt. But what is the impact of Coronavirus on investment portfolios?
It is natural for investors to be concerned about the impact of recent falls in share prices on their investment portfolios, however we urge investors to stay calm.
Economic impact of Coronavirus
The Asian markets saw the greatest falls regionally, with the Shanghai Composite dropping 10% on 3 February. However the next day the market bounced back nearly all the way.
There are some sectors that are experiencing particular difficulties, especially those that rely on trade to move parts or distribute their products. The holiday industry is also seeing a reduction in bookings as travel restrictions are being imposed to halt the spread of the disease.
The retail sector is reporting challenges worldwide due to production in China being impacted, and more locally sales in China dropping off as consumers stay indoors. This is most keenly felt by luxury brands given that Chinese customers account for around 35% of the global luxury industry.
Coronavirus impact on investments
It’s important to remember that world events and investors’ views are already factored in to share prices. As stated in our article on Brexit we recommend keeping calm at times of crisis.
It is worth looking back to the historical performance of markets to allay any concerns you may have. The markets demonstrate a steady improvement over time regardless of world conflicts, health scares and even the credit crisis of 2007/8.
Short-term falls can be alarming, but over time the markets recover and as investing is a long-term strategy, these market fluctuations are eventually ironed out.
Of course the past performance of markets and individual shares is not a guarantee of future performance, but it is worth noting that the investment community is united in holding fast.
Investment portfolio concerns
If you are concerned about the impact of Coronavirus or other events on the value of your investments it is important to keep your head and trust in the robustness of your portfolio and continue to take a long-term view.
Most portfolios have a balance of risk to smooth over any market fluctuations therefore Coronavirus, like Sars and Zika virus before it are unlikely to have any significant impact on your overall investment portfolio.
The view of the investment community is clear – sit tight and weather the current storm.
If you have any particular concerns about the impact of Coronavirus or recent market performance on your investments please contact your Financial Planner.