How does COVID-19 affect markets?
On 20 February, the bellwether ASX200 index closed at 7162 – a record high. On the 19th of March , its close at 4747 points represented a drop of 2415 points or 33.7% from this high point. To state the obvious, the actual and potential economic impact of COVID-19 (coronavirus), globally and locally, has markets spooked.
It’s the very unknowns about this virus, when coupled with the fact there is no vaccine, and lack of clear global government action, that is fuelling public anxiety and investor panic.
In this volatile investment environment, investors need to take a deep breath and hold their nerve. Like all crises that afflict the markets, such as the Global Financial Crisis, the dot.com crash, or the Black Monday 1987 crash (Tuesday in Australia), it will pass, and markets will recover.
Many of the companies listed on the stock exchange have sound fundamentals that will not be significantly impacted by COVID-19.
Companies that are well-managed, hold cash reserves, have revenue streams largely immune to the economic fallout from COVID-19 and with strong growth prospects had those qualities on 20 February – and still have them today.
In fact, there will be companies that could benefit from the changes in consumer behaviour due to the virus.
At Raiz, we completed a capital raise in December 2019, so have a strong cash position and are well funded. Our flat monthly fee model means our revenue stream is largely immune to the market fallout.
The systems and processes we have put in place at Raiz would allow us to serve our users even if there were a Government decision to effectively lock down the country.
We have taken all possible steps to ensure the business can operate normally with all staff capable of working remotely to maintain the highest level of service.
None of this is to minimise what is happening, or the real economic consequences it’s having and the hardship it could cause to employees in certain sectors such as hospitality or tourism.
Indeed, what is happening is a reminder that humans are not invincible, and that a microbe can have a huge impact on the world we live in.
Markets, unfortunately, do fall when such uncertainty takes place – sometimes sharply – and the worst possible response is a knee jerk reaction. Investment is a long-term game, and the events of recent weeks are a sober reminder of this.
Remember, investing small amounts regularly, over time, consistently, and no matter the market conditions, could help you gain financial experience and build a savings base.
Important Information
The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.
