A drop in oil prices sent international shares tumbling when stock markets opened this morning.

Concerns about the impact of the coronavirus on global economic growth have weighed on demand for oil. Over the weekend, talks took place between the Organization of the Petroleum Exporting Countries (OPEC) and other producers about cutting output to support oil prices, but they failed to come to an agreement. In response, Saudi Arabia, OPEC’s de facto leader, said it would raise production and lower prices in an effort to preserve its market share and win over new customers from rivals.

When the commodity markets opened on Sunday evening, oil prices plunged. Investors reacted on Monday morning by moving money out of riskier assets such as shares and into what are traditionally considered ‘safe haven’ assets like government bonds which fluctuate less in price during periods of turbulence. The FTSE 100 opened 8% lower, but recovered some of those losses in early trading.

The coronavirus outbreak has rattled markets. In China, where it originated, the authorities appear to have contained the virus, but it continues to spread internationally with new cases reported in most countries around the world. Italy has been hit particularly hard, with much of the northern part of the country now under lockdown.

Central banks have taken steps to limit the impact of the virus on the global economy. At its meeting last week, the Federal Reserve, the US central bank, cut interest rates by 0.5%. The Bank of England looks set to follow suit at its next meeting on 26 March, if not before, and the Chancellor of the Exchequer is expected to include various measures to help businesses when he announces the budget on Wednesday. Meanwhile, the International Monetary Fund has pledged US$50 billion to support developing countries struggling with the virus.

While the current turbulence may cause you some concern, try to avoid any knee jerk reactions. It’s important to remember to look on your portfolio as a long-term investment, with most portfolios designed to deliver returns over a period of at least five years. Although coronavirus may hinder the markets in the short term, we do not expect the effects to be long lasting.

Diversification, the spread of investments across different asset classes and regions, can also help. While bond holdings may not completely offset the losses caused by shares, they should offer a degree of protection as the market fluctuates.

If you have any questions about the impact of the coronavirus on your portfolio, please don’t hesitate to contact me.

This update reflects our view at the time of writing and is subject to change.

The document is for informational purposes only and is not investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.