Global shares fell again this morning after US President Donald Trump banned travel from most European countries to the US in an effort to contain the coronavirus. The ban only applies to people, not goods, from countries within the Schengen common visa area (so it does not include the UK) and lasts for 30 days.

The FTSE 100 and the Stoxx 600 index of European shares both fell 6% when the stock markets opened, with the travel and leisure sectors coming under the most pressure. Oil prices, which weighed on the markets at the start of the week due to a price war between the Organization of the Petroleum Exporting Countries (OPEC) and its partners, dropped again as demand is likely to fall from airlines.

President Trump’s announcement followed the World Health Organisation’s decision on Wednesday to classify the coronavirus as a ‘pandemic’ meaning it is spreading around the world. This classification does not change the threat level, but it should encourage countries to take extra measures to contain the virus, which the markets would welcome.

The spread of the coronavirus has accelerated in the West, and many of the major share indices are experiencing or on the verge of a bear market- traditionally defined as a 20% decline - for the first time since the 2008 financial crisis.

However, the number of new cases in China has fallen dramatically. The Chinese are slowly returning to work, which will ease the pressure on supply chains. Fear levels remain high, but if the virus can be contained, and governments and central banks continue to offer support, the overall disruption to the global economy could end up lower than currently expected by the markets.

Understandably, many investors are concerned about the impact on their portfolios. The advice remains the same - try to avoid making any rash decisions. Portfolios are designed to deliver returns over the longer term, and there have been periods like this in markets before. Although the current turbulence may be hard to stomach, it should turn out to be temporary. Investors are usually rewarded for staying in the market.

Diversified portfolios, where investments are spread across different asset classes and regions, offer further peace of mind. The theory behind diversification is that if one asset class or region underperforms, others should make up for it. While shares have tumbled over the last couple of weeks, investors have moved their money into bonds which could help to offset those losses.

Finally, each client’s portfolio should reflect their attitude to risk. Portfolios with a greater proportion of shares may underperform while the coronavirus hovers over the markets, but they tend to deliver better returns in the long term. On the other hand, returns from portfolios with a higher allocation to bonds should fluctuate less in the short term.

Toni Meadows
Chief Investment Officer
Omnis Investments Limited

Issued by Omnis Investments Ltd. This update reflects Omnis’ view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your Openwork financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority.