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Investment Insights

Coronavirus Market Impact - An important update from Kiwi Invest

Simon O'Grady, CIO

Written by Simon O'Grady, CIO

Chief Investment Officer

Wednesday 26 February, 2020

As the spread of coronavirus worsens, local and regional markets are falling - and there’s no shortage of news to unsettle nervous investors.

While previous consensus was that Covid-19 would be quickly contained, new reports of surging infections in South Korea, Italy and Iran have led to a fast, and significant adjustment in thinking that is being reflected in heavy selling across the region.

But while specific companies and sectors (such as tourism) are indeed likely to suffer impacts in performance - we believe it’s important for investors to distinguish between the short term ‘symptoms’ of specific events, and the long-term performance of their portfolios.

The good news for Kiwi Invest clients.

While short-term losses are never ideal, there are a few key factors that should encourage our ‘Kiwi’ investors that they can ride out this storm - as we have many others.

The first is that our investment model is truly global, not local. Rather than concentrating our investment decisions and expertise in our immediate region - or Asia, more broadly - we evaluate companies and opportunities across the globe, so that a dip in one sector or region, could be offset by gains in others. This greater diversification aims to provide more robust, reliable long-term performance.

The second, is that as an active investor (not a passive, index-driven fund) we are well-placed to respond to any ongoing ‘thematic’ impacts that the current crisis may create. The strong performance of our Global Thematic fund in 2019 helps illustrate the value of leveraging global ‘themes’ and trends in our investment process – which we will continue to do as the trends created by the coronavirus outbreak become clearer over time.

But thirdly, and most importantly, is the insight that cool heads usually prevail. Rather than looking at current market falls as a reason for panic, it’s more helpful to view them as the price we pay for enjoying returns that, over long time horizons, are likely to be substantially higher than those for cash or bonds. In our view, nothing so far - in either the economic data, or the market indicators that most reliably predict economic swings - suggests we are heading for anything worse than a modest slowdown in economic growth.

As individual investors, we cannot control volatility. What we can control is our own mind-set and reaction - and the more level the head, the better the long-term results are likely to be.

If you’d like to talk, just get in touch with your adviser.

As always, our 100% local team are here to answer any further questions you may have - starting with your dedicated personal adviser. We’d encourage you to get in touch with any questions about the current market ‘ripples’ - and the actions we’ll be taking in response.

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