Saudi Arabia’s decision to slash oil prices threw The Organization of the Petroleum Exporting Countries (OPEC) into disarray and the cost of a barrel of Brent Crude tumbling over 30% in early trading.
Panic spread from commodities traders to other sectors. Share values, already wobbling due to concerns over the economic effects of COVID-19, fell sharply with the FTSE losing nearly 9% of its value on opening.
Shell, which we had only recently sold, fell by over 20% as oil companies were whacked with the double whammy of OPEC disagreements and a pandemic that will cut demand, at least in the short term.
Our recent stance of being cautious over the effects of COVID-19 has proved very defensive in this sell-off. We’ve already started looking for bargains whereby panic selling has created opportunities, and we have significant levels of cash in all three of our multi-asset funds to take advantage of them.
Pandemics are part of our history. They happen periodically and COVID-19 is the fourth in 102 years. Unfortunately, the last one was in 1968/1969, so despite the likelihood that they will occur roughly every 25 years it is only those aged 70 or over that can remember them. That makes them spooky for the rest of us and this uncertainty carries over into financial markets.
My main concern is timing an increase in equity exposures because on past evidence, economic disruption from pandemics it is short lived, and a lot less devastating to asset values than the consequences of a financial crisis, like 2008. So buying opportunities will occur and we will do our very best not to miss them.
We will keep our investors up to date with periodic bulletins like this one, but if you have any further questions please contact your Courtiers adviser.
Gary Reynolds CFA
Chief Investment Officer
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