Microscopic to Macroscopic … Covid-19
Just three months ago, the Nations of the World were pre-occupied with Global warming, climate change, pollution of the Oceans … while a microscopic organism exited its animal host, migrated to a human host and began quietly proliferating among the people of Wuhan City in China. An unverified report from the South China Morning Post says that a 55-year-old may have been the first person to contract the disease on 17 November 2019. It was not until early January 2020 that a formal investigation was launched in China. The chart below is particularly informative …….
The left-hand axis is a cumulative number of all confirmed cases and the right-hand axis is the daily number of new cases reported. The scary part is how fast the number of confirmed cases grew, from zero to 70,000+ in a month – but the pleasing part is how well China has succeeded in controlling the virus. Note the fall in new daily reported cases from the peak on 4 February 2020 through to end Feb 2020. So, China has seemingly brought the virus under control – but few countries can emulate the resources and control measures they brought to bear on their people to achieve what they have so far. China’s mortality rate is just below 4% – while Italy’s rate is currently just under 8%. The global mortality rate is estimated to be around 4%.
SARS (November 2002 to July 2003): was a coronavirus that originated from Beijing, China, spread to 29 countries, and resulted in 8,096 people infected with 774 deaths (fatality rate of 9.6%). Considering that SARS ended up infecting 5,237 people in mainland China, Wuhan Coronavirus surpassed SARS on January 29, 2020, when Chinese officials confirmed 5,974 cases of the novel coronavirus (Covid-19). One day later, on January 30, 2020 the novel coronavirus cases surpassed even the 8,096 cases worldwide which were the final SARS count in 2003. MERS (in 2012) killed 858 people out of the 2,494 infected (fatality rate of 34.4%).
Covid-19, at time of writing, had 204,047 confirmed cases in 170 countries with 8,250 deaths! A different “beast” entirely!
Global market turmoil …
Panic equity selling began during the last few days of February 2020 and picked up steam in early March. The doomsayers were propelled into our homes by the media as if Armageddon was upon us. Of course, it is not – but the coronavirus is no “normal flu” and has to be taken very seriously by everyone to avoid a collapse of an already burdened health service.
In the short-term the negative economic impact will be very real and felt throughout the small to large sectors of the economies of all countries. Those hardest hit will be the countries that lose the battle to flatten the contamination rate among their people. China and South Korea have already shown that control of the virus is possible while the search for a cure and/or vaccine continues apace.
Time to put some perspective on the world share markets with a 30-year view of growth in the chart below:
Now reflect on the 1999 Millennium “crash” and then the 2008 Global Financial crisis – both were over within a relatively short period of time – followed by a healthy period of solid growth well above the pre-crash peaks. The chart below (same index) shortens the view to 10 years but brings us up to date to 17 March 2020.
Over 10 years and after the record sell off in markets end February through mid-March, the World Equity index is still up by 90.9% in US Dollars. The green line in this chart reveals that our local South African equity market [JSE All Share Index] is negative by -13.5% in US Dollars over the same period.
We have consistently encouraged clients to increase their global investments and those who have done so will have been rewarded. Pre-retirement products like retirement annuities, pension and provident funds are compelled to invest a minimum of 70% in our local markets – and that has detracted from their performances, particularly over the past 5 years.
Message for investors
Now is the time to focus on doing everything required to avoid coronaviral infection for you, your family and your friends. We enclose a heartfelt article written by a young lady Doctor in Australia which brings home the seriousness of the current pandemic – take the time to read it.
The team at Finlaw are taking all appropriate precautions and have handwash for clients / visitors to use as needed. Each of us are equipped to work from our respective homes via internet link to the office. We do not anticipate any interruptions to the services we provide to our clients.
No point losing our sense of humour though – so pop in for a throat rinse any time you feel the need 😊!
We normally like to meet face to face with as many clients as possible at this time of the year – especially given the market turmoil. We fully respect the need to reduce person to person contact … so will be more than happy to consult with clients telephonically if they wish. Those who have Skype or WhatsApp can hold video chats with me by appointment on my mobile phone 0834593999 if so preferred. Always best to fix a time in advance so that we can give the matter our undivided attention.
Rest assured … markets will recover …
Many of our clients have been with us through the Millennium “melt-down”, the Global Financial Crisis and the many air-pockets in between – so they know the rewards of sticking to their long-term investment strategy. We encourage newer clients to remain calm. The values of your portfolios will fluctuate in the short to medium term – but the long-term benefits of sticking to the plan can be clearly seen in the graphs above.
Some tweaking may well be necessary – tactical rebalancing – so please don’t hesitate to contact us if you have any concerns. We will raise specific issues with those of you affected by funds which we have concerns about.
From 1 April 2020 we will be back to our full staff complement after eight months of overlapping maternity leave. Kirsten is back and Stacey returns to full time service at the end of the month. We thank all clients for their patience in this past period and trust that none have experienced any untoward service difficulties.
We will shortly be embarking on an exercise to update our Client identification documentation as required by our Risk Management & Compliance Program. Please help us when you receive our specific requirements – we will only bother you with information that we are compelled to hold so that we can retain our business license and continue to serve you.
Keep in mind that your interests are perfectly aligned with ours – the more we assist you to grow your portfolio – the more our business grows … and conversely when you suffer, so do we.
Kind regards
John Wallace
