Last update: 09.02.2020 21:16
There has been a lot of talk in recent weeks about how the coronavirus COVID-19 will affect the global economy and the stock markets.
There has been a lot of news hype: how many people have fallen ill or died from the virus in which country?
But what impact will the coronavirus have on your shares?
Read on and stay on top of things.
There is no doubt that the coronavirus will have an impact on the economy
China is a very important foreign trade partner for Europe.
Prolonged disruptions or production stoppages in China and disruptions to supply chains can therefore have a negative impact on economic growth in Switzerland and Europe.
The travel bans from China also affect airlines and tourism, which has a negative impact on us in Switzerland.
As many airlines have also restricted their operations to and from China in whole or in part, freight capacity is much smaller than usual, which increases freight prices.
For China itself, a significant decline in gross national product of around 2% points is expected and for the global economy, financial experts expect a temporary but significant drop in global growth at the start of 2020.
Due to the precautionary measures in European countries and Switzerland, events are not taking place and many companies are suffering economic damage.
And what does this mean for you, what impact should you expect the coronavirus to have on your shares?
The short answer is: you can’t really know
Nobody knows how the virus will spread.
This is why the volatility on the stock markets is so high.
Nevertheless, it is worth putting the impact of the coronavirus on your shares into perspective.
As of Saturday, March 7, 2020, COVID-19 is believed to have caused the deaths of 3,500 people around the world(source updated on an ongoing basis).
This is more than the respiratory disease SARS 2002/2003, which killed 774 people worldwide.
At around two percent, the mortality rate of COVID-19 is significantly lower than that of SARS (10%), but much higher than that of normal flu (0.01-0.1%).
In addition, a very large proportion of coronavirus infections are comparatively mild – 57,5700 had also recovered by March 7, 2020.
In comparison, there are tens of thousands of deaths from the flu every year.
According to the Federal Office of Public Health In Switzerland alone, the flu (influenza) leads to 112,000 to 275,000 visits to the doctor every year.
Complications of the disease lead to several thousand hospitalizations and several hundred deaths.
In Switzerland alone. Influenza viruses are particularly prevalent during the cold season and cause a flu epidemic practically every winter. During the 2018/19 flu epidemic, around 2% of the Swiss population consulted a doctor due to flu-like illnesses.
But: put the impact of the coronavirus on your shares into context
COVID-19 is new, it’s scary because the coronavirus cannot be assessed and there is no vaccine.
But according to everything we know today the normal flu has a much greater economic impact.
Deren Effekt ist in die Aktienmärkte “eingepreist”, weil sie nichts Neues ist.
Der Vergleich von COVDID-19 zur Grippe oben zeigt, dass wir Menschen wirklich schlecht in der Bewertung relativer Risiken sind.
Es ist ein bisschen dasselbe Prinzip wie bei der Flugangst: Menschen haben Angst davor bei einem Flugzeugabsturz zu sterben, aber sie denken nicht über das Risiko nach, das sie auf dem Weg mit dem Auto zum Flughafen tragen.
Denn es ist viel wahrscheinlicher, dass du beim Autofahren als beim Fliegen verletzt oder getötet wirst.
Pro 100 Millionen Kilometer gibt es mit dem Auto 20 mal mehr Tote als beim Fliegen.
The stock markets have repeatedly been hit by the coronavirus
And there is always something frightening, something new that threatens to bring the financial markets crashing down.
In the last decade, we have dealt with flash crashes, among other things. the Greek sovereign debt crisis and the debt crisis in many other European countriestwo Black Mondays (2015, 2018), the capers of the Chinese stock market and Brexit.
Recently, we have also had to contend with an inverted yield curve and a trade war between the US and China.
And when the stock market wasn’t struggling with a massive external problem, everyone was convinced that the current market stability could only be an indication that the market was about to crash… And yet the global stock markets have risen year after year after year.
From 1926 to 2018 , you have always achieved a positive total return with Swiss equities over any investment period of more than 13 years.
You can see this from the return triangle for the Swiss Market Index.
From the beginning of 1926 to the end of 2018, the average increase in value on the Swiss equity market was 7.6%.
You can achieve similar values with investments in global equity markets.
Summary
So what should you do about the impact of the coronavirus on your shares?
Nothing at all.
Keep cool.
We know that may be a counter-intuitive answer and difficult in a strongly corrective market environment.
Not the most satisfying answer for you, but it’s probably the right one.
Stock markets move based on new information.
And how that new information matches investor expectations.
If the news is better than everyone thought, the stock market rises.
If the news is worse than expected, the stock market falls.
But we can’t know what will happen next.
And the bad news is already priced into the share price.
You can therefore consider whether you want to take advantage of the more favorable prices to build up or expand your exposure to the stock market.
Because time, not timing, still applies.
We have used the weak days to expand our equity position.
Trusting in the long-term growth trend.
And are following the old stock market wisdom of the banker Rothschild: “Buy when the cannons are thundering, sell when the violins are playing”.
That’s why you should stick to the boring things we know work: allocate your investments according to your risk tolerance and needs, stay disciplined with your investments and focus on your long-term goals.
