Global stock markets are having their worst week since 2008, in the midst of the Global Financial Crisis. Volatility is high. Quarantine efforts are increasing as Europe attempts to contain the spread of COVID-19.
Most people survive COVID-19 and this increases its propensity to spread. The problem that the major economies of the world now face is that many of their workers could be laid low and homebound as they recover from infection or are quarantined. That will affect all types of businesses, but particularly those that are very labour intensive.
Markets hate uncertainty and as containment appears increasingly futile, fears that COVID-19 will dramatically disturb economic output have sparked a sell off. The FTSE 100 index has dropped almost 8% since Monday morning (to Thursday night’s close). The US has seen a bigger hit and the S&P 500 has slumped almost 11%. European equities have been weak with the largest companies in Europe (measured by the Eurostoxx 50 index) declining over 9% alongside the FTSE MIB index of Italian companies also down nearly 8%. Today (Friday) sees further losses across all global equity markets. The Vix index, measuring volatility, has spiked a further 56% since my last update and is up 129% during the week so far.
We remain cautiously positioned with equity exposure at historic low levels. Our defensive stance using options has helped to alleviate the effects of this week’s sell off.
Courtiers Total Return Cautious Risk Fund has been relatively defensive amidst the market declines. Over the week (to close of business on Thursday) it has fallen just over 4%. Courtiers Total Return Balanced Risk Fund, with slightly more exposure to global equities has declined 5.9% and Courtiers Total Return Growth Fund has fallen 7.7%.
We will continue to monitor the situation but in the interim we are being very cautious. It is likely that there will be a good time to start buying again, especially because, after COVID-19 has swept through a population, things should return to normal quite quickly. But that time hasn’t arrived yet.