The novel Corona Virus, or officially termed as COVID-19, is an unfortunate pandemic that is affecting lives and livelihood across the globe. During these testing times, we strongly recommend that everyone stay indoors and contain the spread of this deadly virus.
While the entire globe, especially doctors, medical researchers, and those affected, fight this devastating disease, the markets have responded strongly. As anyone in the financial markets will tell you a moment in time is an eternity when the markets are moving. We’re obviously watching the markets roiled as updates come along. The markets world over have had steep falls similar to that we all witnessed during the 2008 global crises post the fall of Lehman Brothers. As opposed to the 2008 meltdown, which was predominantly due to credit negligence by financial institutions, the severity of the current market reaction is justified as businesses across the globe have just hit pause. There is a fear among the masses that have, in turn, led to a cessation in the movement of people; stores have no footfall, malls, restaurants, and cafes are shut, manufacturing and production in China and everywhere else has stopped. Businesses and hence the markets have gone south.
However, here’s the good news. While all markets across the globe have been down in hell the last couple of weeks, the Chinese stock market is trending in green. The reason behind this silent rise is due to the fact that the number of new COVID-19 cases in China is on a steady decline. China has now closed down the makeshift hospitals and has been successful in drastically reducing the spread of the disease.
With a focus in the financial and commodity markets, the keys to maintaining balance is to stay informed. Watching currency markets are as important as covering import and exports of commodities. There is no way to predict such a ‘black swan’ event, but we can compare prior markets as they make their way through these critical anomalies. As everything in this world is a new news event, everything follows a cycle that is familiar.
The rest of the world will follow suit. There is HOPE. As people and businesses spring back to life the markets will react positively as the world recovers from yet another slump. We know that this is the time to get greedy. We have seen the dot com bubble, have witnessed the 2008 meltdown and know for a fact that this a golden opportunity to invest. To invest in strong businesses and take advantage of this volatility. This short term slump is not just due to slowing business but also a strong negative sentiment and negative momentum. Good businesses are up for grabs at a lower price.
Although we understand that there may be further downturns in the market before it hits rock bottom, we would advise investing intermittently rather than a lump-sum investment. Yes, we believe that this is the right time to invest. When everyone else flees, we choose the right businesses to invest in and thus helping our client make the most out of their investments.
Hopefully, in a few months, we would be looking back at the Corona Virus pandemic and think about the losses in terms of life. While the markets shook, we would also marvel on how it stood resilient, even in tough times. We can never be sure of what impact it can have on the economy, fear is real, but it can be exaggerated compared to reality.
To conclude with Abraham Lincoln’s famous words: “This too shall pass!”
Interested in knowing how to plan your finances? We would love to have a word with you.
Written & published by:
Prashanth Prabhu, Founder & Principal Investment Adviser – 29k Group
Sheren Susairaj, Marketing Associate – 29k Investment Advisers Pvt. Ltd