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Other Threats to Your Investments Besides Coronavirus

Other Threats to Your Investments Besides Coronavirus

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By Tuesday, 14 April 2020 08:00 AM Current | Bio | Archive

In order to safeguard and increase their wealth, it’s crucial that investors keep a close eye on other major factors, not solely coronavirus.

Following the sharp rally last week in global markets, with the MSCI experiencing its largest increase in over 10 years, as Q1 earnings results season kicks off this week we’ll have a better understanding of just how hard the COVID-19 pandemic has hit corporate America and corporate Europe in the first quarter.

It’s almost certain that the results will lead to extensive downward revisions.

Nevertheless, there is a budding optimistic investor sentiment as numerous countries take steps to lessen lockdown restrictions and as many of the most gravely impacted countries see the long-awaited flattening of their infection curves.

Indeed, more and more investors are now focusing beyond the current poor data to the likely recovery heading towards the end of the year.

That said, the coronavirus pandemic will have a bearing on investment decisions for a long while yet, as it has profoundly altered how we do business in numerous respects.

It has sped up the pace of the Fourth Revolution, which is driven by new technologies and digitalisation.

Consequently, new industries will come to fruition, certain existing sectors will enjoy a robust rally, while others will decline.

Due to the far-reaching impact of the pandemic, investors across the globe are not just keeping tabs on the typical markers such as gold and oil prices and international fiscal and monetary policies, they’re also monitoring global health policies and coronavirus-death tolls.

However, there are also concerns that the headline-dominating coronavirus news could stop investors from tracking other key factors that could substantially impact their returns.

Indeed, as well as coronavirus, investors must take other possible headwinds into consideration.

These potential headwinds include uncertainty stemming from the U.S. presidential election. Of course, uncertainty usually rises in election periods, something financial markets abhor.

Naturally the 2020 U.S. presidential election is seen by many as especially significant as not only will the winner be the head of the world’s largest economy, they will be undertaking that role during a time when the world is economically readjusting following the impact of the coronavirus pandemic.

Another key headwind is the threat of a no-deal Brexit to the UK, EU and global economies. Up to now the British government has not backed down from its threat to abandon crucial, complex discussions in June if no progress is being made, regardless of the immense financial disruption as a result of the spread of COVID-19.

Furthermore, another major concern is the inflation threat over the longer-term.

Central bank balance sheets will expand. As we saw with the asset purchase initiatives introduced in the previous financial crash, there are risks that too much cash is being produced.

When the pandemic has come to an end, and cash isn’t being stashed in the same way, will individuals and businesses use cheap loans and their cash reserves to boost an economic recovery into inflation?

Of course, coronavirus is still the principal headwind investors are facing. Nonetheless, in order to protect and grow their wealth, investors must not sidestep other key issues that will likely affect their returns.

Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.

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In order to safeguard and increase their wealth, it's crucial that investors keep a close eye on other major factors, not solely coronavirus.
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2020-00-14
Tuesday, 14 April 2020 08:00 AM
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