COVID-19 update for clients
The outbreak of coronavirus, COVID-19, is first and foremost a human tragedy, affecting many people around the globe. It is also having a growing impact on the global economy and stockmarkets.
Your portfolio
The epidemic itself was not something we could predict, but we constantly prepare for unexpected bouts of volatility.
Our clients have proven time and again they know how to stay calm in a market downturn. But for those who are weathering their first bout of market volatility or could just use a friendly reminder, we recommend re-reading these articles:
https://www.stewartpartners.com.au/insights/2019/3/5/why-youre-crazy-to-sell-when-shares-prices-fall
https://www.stewartpartners.com.au/insights/2018/2/6/firedrill
An investment plan established during calmer times should not be abandoned in the midst of a market downturn. Let the benefits of diversification play out.
The current market volatility is well within the bands of normal expectations. Since the US stock market peaked on 19 February 2020, it has fallen 12.6%. In Q4 2018 when the market was reacting to US-China trade wars, the US market fell 13.5%, and most investors have likely already forgotten about that volatility.
Stewart Partners’ business and meetings with clients
The wellbeing of clients, employees and their respective families is a top priority for Stewart Partners. We have a documented Business Continuity Plan (BCP) for circumstances where our team cannot access our office. All advisers are able to log in securely to our network systems from home and work as normal. We also have video conference facilities (e.g Skype, Zoom) available to talk with clients at any time. Please be assured that no matter what COVID-19 has in store for Sydney, the team at Stewart Partners will remain available to all clients.
If you have an upcoming meeting with our team and would prefer not to travel to our offices, please let us know and we can arrange to conduct the meeting via video conference or phone. If you are feeling unwell or have recently travelled to or through high-risk areas, or been in contact with people who have, as a precautionary measure please inform us so we can make alternative arrangements to meet with you.
If you have any questions or concerns, please contact any member of our team. We appreciate your understanding and patience.
COVID-19
COVID-19 crossed an inflection point during the week of 24 February 2020 when cases outside China exceeded those within China for the first time. Currently around 90 countries are reporting cases. The outbreak is most concentrated in four transmission zones—China (centred in Hubei), East Asia (centred in South Korea and Japan), the Middle East (centred in Iran), and Western Europe (centred in Italy). In total, the most-affected countries represent over 40% of the global economy.
The daily movements of people make it difficult to contain COVID-19.
The World Health Organisation last week compared COVID-19 with influenza. Both cause respiratory disease and spread the same way, via droplets of fluid from the nose and mouth of someone who is sick. However, there are some important differences, including:
COVID-19 does not transmit as efficiently as influenza.
COVID-19 is a more severe disease
COVID-19 has no vaccine as yet, although 20 vaccines are in development
For the vast majority of people, contracting the virus will feel like a bad cold.
McKinsey and Co have published some scenarios for the impact of COVID-19 on the global economy[i]. We’ve summarised their findings for you:
Expect a global economic slowdown in 2020. In the chart below, the Base Case scenario has a 0.3% to 0.7% reduction in global GDP. China continues on a path to recovery, achieving a near-complete economic restart by mid-year.
Source: McKinsey & Company
Regions that have not yet seen rapid case growth (such as the Americas) are increasingly likely to see more sustained community transmission (for example, expansion of the emergency clusters in the western United States). Greater awareness of COVID-19, plus additional time to prepare, may help these communities manage case growth.
Unsurprisingly, sectors will be affected to different degrees. Some sectors, like aviation, tourism, and hospitality, will see lost demand (once customers choose not to eat at a restaurant, those meals stay uneaten). This demand is largely irrecoverable. Other sectors will see delayed demand. In consumer goods, for example, customers may put off discretionary spending because of worry about the pandemic but will eventually purchase such items later, once the fear subsides and confidence returns.
Author: Rick Walker
[i] https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business