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Market Declines and COVID-19

Uncertainty is being felt worldwide, on a human level and financially as we look to see how markets respond.

Global Economy

The ongoing spread of the outbreak is causing concern about the impact on the global economy for companies, governments and individuals. Apple announced that its expected revenue will take a hit from its business relations with Chinese manufacturers. Whilst, Australia’s Prime Minister, Scott Morrison, stated that the virus will likely be a global pandemic and a serious blow to the economy.

Over the recent weeks market values have declined with the continued spread of the Coronavirus. The virus’s potential impact on the production and distribution of commodity along with the global economy has become increasingly pessimistic.

History dictates that markets will recover

However, during this period of high market volatility be assured that the long-term trajectory for market assets is higher. Corporations and the value of these assets will recover and start to rise again once the threat of the virus has been lifted. Even if markets continue to fall in the near future, as in the past, when life starts to get back to normal again, the market will bounce back and recover.

Global stock market performance

The Capital Associates wealth management experts understand the wider market picture against discrete market corrections. Previous world epidemics such as when SARS struck in 2003 have seen a drop and then subsequent rise in the global stock market performance. This rings true for the past market disruptions with the health crises of Ebola and swine-flu and the global financial crisis of 2008–2009.

Markets process information in real-time and are fundamentally designed to handle sharp declines and uncertainty. Declines may be distressing to investors who are forced to reassess their future expectations, but also demonstration that the market is functioning as to be expected.

Heightened uncertainty with increased risk pushes prices and returns lower. Despite this, the expectation is that the present risks will be compensated with favourable returns in the future. Years of scientific financial analysis along with long-term investing principles remain a strong and positive guide amidst the anxiety.

We believe the key to successfully assisting our clients is in developing a long-term plan which considers a wide range of possible outcomes. By helping our clients to establish well planned carefully designed asset allocation they are prepared for any eventuality including possible downturns. To find out more about our services click here

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