History may be no indication of future performance, but it is worth reflecting on how past ‘outbreaks’ have impacted global markets.
From SARS in 2003 to the twin strikes of Ebola in 2014 and 2016, and a bout of Zika in between, disease has made headlines and jostled markets. But each time, the outbreaks – and the financial losses – were eventually contained.
The uncertainty posed by past outbreaks had a negative impact in markets, however the average recovery period was around six months. This suggests early sentiment drives losses, but sustained economic impacts are perhaps less than investor’s fears at the onset.
Since 1981, there have been thirteen global epidemics but little evidence linking them to long-term fundamentals (see Exhibit 1). For investors, it means avoid reacting and keep focused on their overall plan.
As the impact of COIVD-19 unfolds, it remains possible that the economic impact could be considerable. For instance, does this signal a possible rethink of free trade which has created a global supply chain totally reliant on China?
Do governments now look to shore up domestic economies with the introduction of subsidies to protect local manufacturing from exogenous shocks? Only time will tell.
Exhibit 1: Investors tend to react to epidemics, but the long-term picture is positive
A Considered Approach
A sound financial and wealth management should always factor in left-field events, whatever they may be. In a world filled with political, economic and social uncertainty, sound financial advice – advice based on evidence, your values and life goals – is critical.
This is what we believe at WARR HUNT, and with significant experience navigating left-field events, we are confident that our approach will continue to protect and improve our clients’ financial well-being.
Please contact us if we can be of assistance.