The coronavirus (COVID-19) outbreak has sparked panic from investors as global share markets continue to plummet.
Sectors like travel, trade, financials and education have taken huge blows and uncertainty now looms over the fate of the global economy.
But while these events can cause you great financial concern, this does not mean your investments are in long-term jeopardy.
How coronavirus has impacted the markets
The spread of COVID-19 and growing fears from its lack of containment has seen Australian and US shares experience their most devastating hits since the Global Financial Crisis.
International trade and supply chains have been severely disrupted, contributing to an Australian share value loss of over $440b*.
Dramatic falls to the ASX in March 2020 saw all gains made January and February completely wiped out.
When we thought it couldn’t get much worse, another blow came when the Reserve Bank of Australia (RBA) announced the cash rate would be cut to a record low of 0.5 per cent. This came unexpectedly to many economists and experts who believed the cash rate would remain at 0.75 per cent.
Many, if not all, industries and sectors are feeling the painful impacts of coronavirus, including energy and materials. However, travel and financial stocks have seen the biggest nosedives and could cause you the most distress.
Global airlines such as Qantas and Air New Zealand along with travel companies like Flight Centre have experienced widespread losses. With travel bans and precautions resulting in reduced or suspended flights and operations, the International Air Transport Association (IATA) foresees global revenue losses for passenger airlines alone hitting $113b.
Financial stocks have endured a similar carnage, with the sector experiencing a 9.08 per cent drop at the end of February and all major Australian banks dropping by over 4 percent*.
Limited access to several countries and trade barriers have also taken their toll on international supply chains and exports. Australian education institutions are also continuing to lose their international student base, with an estimated 95,000 Chinese students currently unable to return for the semester.
But it is the spread of COVID-19 and the potential for a global pandemic that has aroused uncertainty in the global stock markets and spurred investors to sell their shares.
Until the COVID-19 crisis is contained, it’s unclear how all sectors in the stock market will continue to be unsettled and what this means for your investments in the short-term.
What does this mean for me and my investments?
Although the coronavirus is negatively implicating the current value of your investments, it still shouldn’t necessarily prompt you to sell your shares.
Just remember that investments are long-term and hold future benefits. For many of you, the importance of the share market’s value lies years into the future, rather than today.
The market experiencing such drops is certainly no new phenomenon. Share prices have declined before and chances are they will crash again in the future.
Selling your shares now amid uncertainty will only eliminate your potential to make gains when the market will likely bounce back in the future.
In these times of uncertainty, it is more important than ever to get advice from experienced accounting and financial planning experts and ensure you’re prepared with the right strategy.
Contact Nitschke Nancarrow, specialists in accounting, financial planning, investment and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
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*As of 9 March 2020