With COVID-19 spreading across the world we are seeing major disruption to the global economy.
Business operations have shut down to try and curtail the spread and flights have been banned. This is having knock on effects for supply chains and has the potential to lead the world to the point of economic recession – and it is this fear that has led to investment market losses.
The SA Reserve Bank’s monetary policy committee yesterday cut the repo rate by 100 basis points, or one percentage point, from 6.25% to 5.25%. The Reserve Bank is under pressure to help arrest the economy’s downward spiral. South Africa is already in recession, and the fall-out from business disruption due to the coronavirus crisis will be significant.
While consumer inflation reached the highest level in 15 months (4.6%) in February, Brent crude oil is now trading around $27 a barrel, from above $56 in February. At this stage, it looks like petrol prices will come down by at least R1/litre in the first week of April, which should ease inflationary pressure on the local economy.
While fear has certainly gripped global markets, we believe this is a situation that will largely be resolved as we move through the year and we can expect a reasonable recovery in terms of economic activity and stock market levels. No one can predict the peaks and troughs of financial markets with any accuracy however, and it is extraordinarily difficult to time when the best (peaks) and worst (troughs) are, so often the preferred policy is to stay fully invested over the medium to long term.
Volatility is a normal part of long-term investing which is why we always take time to understand how much risk any client is prepared to take before investing. We also generally believe in the benefit of diversification of assets to help manage some of the extremes of the markets. Taking a multi-asset approach means that some assets can fair better in different market conditions as they are more defensive assets such as bonds, whereas during periods of growth equities tend to fair better.
Presently, we believe the appropriate course of action is patience. Some investors may even see this as an opportunity, with equities clearly lower priced than they were even a few weeks ago, however, our philosophy is that time in the market, not timing the market, is usually the best approach.
As we continue to monitor reports of the impact of the Coronavirus (COVID-19), we want to assure you that we remain committed to delivering outstanding financial solutions.
During this evolving health situation, the safety and well-being of our team members, clients, and families is our main priority. We greatly care about our communities and want to do our part to keep you healthy, keep our employees healthy and help minimise the spread of the virus. In that spirit, we are implementing more aggressive components of our Business Continuity Plan to assist in the containment of the coronavirus and help protect us all.
All nonessential client visits are suspended until further notice. We feel that for you, your family and our professionals’ safety, it is best that we delay on-site visits/work at this time.
There will be no signing of documents on-site. Our professionals are available via email, phone, online meetings and video conferencing to continue to serve you. Several of our professionals will primarily work remotely from home during this time, while others are working alternate hours, creating social distancing for those in the office. As we continue to monitor the impact of the coronavirus, we will keep you informed of further changes, including possible changes of the above measures.
On behalf of all of us, thank you for your understanding and support during this challenging time. Remember, we are all in this public health situation together. We wish you, your families and your teams much good health.