Written by: George Prior
Investors remain complacent about an imminent Coronavirus-triggered market correction of up to 10 per cent, warns the CEO of one of the world’s largest independent financial advisory organizations.
The warning from deVere Group’s chief executive and founder, Nigel Green, comes as global equities registered losses on Monday following a surge in cases in Italy, Iran and South Korea over the weekend, and as the first cases are confirmed in Kuwait, Bahrain and Afghanistan.
Mr Green comments: “Global financial markets retreated on Monday as they reacted to the coronavirus headlines over the weekend. But it is likely that they will quickly rebound, as they have consistently done in recent weeks.
“Indeed, stocks keep on reaching record highs.
“This is because many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread – and a faster pace. This will inevitably hit financial markets and investors’ complacency leaves many wide open to nasty surprises.”
He continues: “Major global companies, especially those with heavy exposure to the Chinese economy, are lowering profit guidances due to the outbreak. This will have a knock-on effect across international supply chains and throughout economies. But is the message being heard by investors?
“In addition, coronavirus has struck at a time when major economies, including Japan, Germany, India and Hong Kong are facing a downturn due to other factors such as the U.S.-China trade dispute and political protestors, which could hit the world economy.”
The deVere CEO goes on to add: “Until such time as governments pump liquidity into the markets and coronavirus cases peak, a near-term correction - of up to 10 per cent - is increasingly likely.
“We are hoping for a V-shaped recovery, but our current view is that it will be U-shaped.
“Against this backdrop and with the ongoing uncertainty over the direction of stocks and other risk assets, multi-asset portfolios might be favoured by global investors, given that they offer diversification of risk as well as of return.”
Nigel Green concludes with a warning: “Global markets are at high valuations and the impact of the coronavirus on profits appears largely underestimated.
“In general terms, stocks have hardly been deterred by the coronavirus outbreak. This complacency is concerning.
“Investors need to ensure that their portfolios are coronavirus-proofed as cases jump and a market correction looks more likely.”