InvestNow News – 13th Mar 20 – Pie Funds – A Message from Mike: Dramatic end to month
6 Mar – Mike’s update on how we see things unfolding as coronavirus fall-out spreads
Coronavirus – Dramatic end to month – February fall fastest us stock market correction ever.
What happened?
February will go down as one of the most volatile months in history for asset prices with dramatic moves as news broke the novel Covid-19 virus had spread from its epicenter in Wuhan to other parts of the world. A global pandemic was now not only possible, but likely. The weekend of 22/23 February was the turning point. Investors recognised it was unlikely the virus was going to be contained to China. By the end of that week new infections outside China exceeded those inside China. During such periods of uncertainty investors sell risk assets and shift to safe harbours. The February fall was the fastest US stock market correction ever and the yield of US10 government bonds, widely considered the safest of safe havens, fell to a record low of around 1% from a high of 1.65% only a few weeks earlier. Gold rallied, the US dollar strengthened, and credit spreads widened.
In short, and perhaps an understatement, it was a dramatic finish to the month.
What did we do?
At the start of February, we prepared a portfolio management plan, based on three market impact scenarios which we shared with investors in our February newsletter, being:
Scenario 1. a brief painful period followed by recovery;
Scenario 2. a sustained period of ongoing uncertainty, speculation again ending with recovery;
Scenario 3. a genuine global crisis centred on a pandemic with lasting economic consequences.