“Freefall Friday…”

I know that Corona Virus exists in bats and that it was first discovered in the 1960’s. Bats thankfully are still with us 50 years later, they have probably lived with the virus for millions of years. Humans suffer from about 160,000 different viruses, whereas there are an estimated 6.4 million in the animal kingdom. I know we can’t catch the virus directly from bats, that there must have been an intermediate host such as a pangolin which is a scaly anteater. More importantly I know that a Chinese viral research unit exists only 300 metres from ground zero of the virus outbreak, where work was being done on the viruses bats carry. But I can’t help you with any of this virus knowledge that I’ve researched.

No, you don’t rely upon me for my general knowledge. I’m relied upon for my investment knowledge. So has my thinking changed since I last blogged a week ago? What did I say?

So far stock markets have been humbled but have not crumbled.

Markets are crumbling in the West now, but have already started to stabilise in the East. The monetary stimulus in China is flowing, workers are returning to their jobs, products are leaving the factories. The idea of trying to contain the virus in China is over. The deaths have been concentrated in older people or those with existing lung issues or heavy smokers. In China, the loss of the non-productive masses, whilst the productive workers remain is not exactly a bad outcome for a heartless communist government. Perhaps I’m being too harsh?

political gains

Politicians are leaping on the virus fears for their own ends. Prepare for there to be further promises of additional funds for the NHS from Boris. Attacks from Jeremy saying that Boris isn’t doing enough for the older northern smoking voters he stole. Nicola will want Scotland to leave immediately before they catch the virus from the English. Meanwhile in France, Macron has warned of an “imminent outbreak”, probably in the hope it will stop the continuous yellow vest protests in France.

freefall friday

Meanwhile in the West, our much more sensationalist press are whipping people up in to a frenzy. The media loves a catchy title, which I hope is a little extreme. Unfortunately we are going to see further percentage falls in our investment portfolios. The growth we have achieved over the year has probably all but disappeared. The froth has gone, but the underlying pint of beer remains. It’s been a few years since we had to brace ourselves like this, so it’s important we remember our training. The pendulum always swings too far in both directions. My expectation, as it was last week, is that trying to time the drop and the subsequent recovery is a fools game. Markets will settle and once I’m happy I’ve seen the bottom, we will reorganise the portfolios to catch more of the ensuing upswing than we lost in the rapid fall.

The last time the FTSE 100 fell by 4% in a single day was in August 2015. Previously it fell by 4% over a day a couple of times in 2011.

Yesterday’s fall was the sixth largest fall in the last ten years. Every single one of the largest rises in history followed sizeable falls.

the future

The world is not somehow different now we have Covid – 19. Like the flu, its going to be a huge killer of additional millions of people a year. The probable outcome of the virus is that in the future there will always be a “cold, flu and coronavirus season”. The vulnerable in the civilised societies of the world will have their annual flu and coronavirus jabs. The worry is for those in the non democratic world where the old and infirm are just a drag on the economy.

are you in the correct portfolio?

Now is probably not the best time to be panicking, wishing you were in a more Cautious portfolio. But if you are, then you must speak to me now. I only invest capital for the long term and clients always understand there will be speed bumps along the way. We are investing for our lifetimes. This is perhaps our biggest investment challenge since 2008, if you want to adjust the managed portfolio you are in, we offer everything from Cautious to Go for Growth.

I’ve currently got Lesley looking down the back of the settee for any loose change we may have. This is a great buying opportunity. If you feel the same way give me a call.