Coronavirus is the number one threat to financial markets currently – but most investors should avoid knee-jerk reactions, according to the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green, deVere Group chief executive and founder, is speaking out as global stock markets are rattled on fears of the potentially deadly Sars-like virus triggering major sell-offs.
The death toll has now risen to 81 and almost 3,000 people have been confirmed as infected, with 44 cases having been detected outside China, where it originated.
On Monday, the composite European Stoxx 600 fell 1.7% at the open, London’s FTSE 100 dropped 1.6%, while Germany’s Dax was 1.7% lower. The slump followed a similarly dramatic decline in Asia overnight. The Shanghai Composite fell 2.7%, the Hong Kong Hang Seng lost 1.1%, and Japan’s Nikkei dropped 2%.
“The coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty,” Green said.
“But whilst this health crisis will inevitably hit some sectors, such as travel and retail, most investors who have a properly diversified portfolio should avoid knee-jerk reactions. History teaches us that most issues of this kind have a short-term impact on stock markets.”
He added that, “most investors should monitor the situation with their financial adviser and sit tight at present. But if it is still escalating next week, with much higher casualty rates, a more defensive approach might be necessary.
“However, the cost and effort of making such a switch means you do not do it lightly, and more evidence is needed that the virus does pose a medium to long term risk to China and the global economy.”
The deVere CEO cautioned by saying that this should serve as a wake-up call to all investors to ensure their portfolio is well-diversified across asset classes, regions, sectors, even currencies.
“This is the best way to mitigate risks and the best way to be well-placed to take advantage of the opportunities when they occur.”
“Stock markets tend to bottom with the peak in new cases during a public health issue of this kind, before rebounding within months,” Green said, concluding that, “this is a worrying and serious situation and investors must be vigilant. They should remain properly diversified and remain in the market.”