It has hardly been avoided that the spread of the Corona virus has had a major impact on both human life and economic development around the world. It has also made a huge impact on the global financial markets. The US central bank's announcement yesterday to lower interest rates to near zero and stimulate through increased bond purchases received a negative reception, to say the least, and the world's stock exchanges have once again collapsed today.
The big question is whether this is the perfect storm that triggers a series of negative chain effects for the global economy, or whether it is something that is transient and creates purchasing conditions.
So as we look at the development, it is first and foremost that the concern in many respects is justified. It is simply too many question marks. The spread of the virus has increased and there is a great deal of uncertainty about what happens then and whether our leaders make the right decision. However, the goal is the same for all countries - to reduce the pressure on healthcare by affecting the immediate spread of the virus so that the most vulnerable can be helped in the best way. The positive thing so far is that in most cases those infected have had mild symptoms and that mortality is relatively low.
As far as the impact on the economy is concerned, in the short term it is brutal for some sectors. SAS's announcement yesterday that laying off a full 90 percent of the company's employees is a signal of how bad things are in some places.
The sector in which we invest, security, has also seen significant effects of the virus, at least if one looks at stock price developments. The most notable example is Boeing, which has seen its price more than halved during the year (including the premarket for today's trade). The background is that it has been communicated that the company will utilize an available bank loan of $ 13.8 billion to a maximum, which the market has interpreted very negatively. Otherwise, the security sector has also not been favored by its traditionally defensive nature. Investors have simply sold everything across the board.
How, then, should you behave in this position?
As an investor and saver, it is important not to abandon one's strategy and let the emotions control. We do not know when it will turn around, but we are confident in owning long-term security. It is a non-cyclical sector that benefits from increased uncertainty and whose revenue streams are secured through long government contracts. States will hardly reduce defense spending going forward if the Corona virus creates a continued negative spiral for the world's communities and economies.
At the same time, it must be humble for the extreme market situation we are in. We continue to monitor the portfolio carefully and weigh down companies with greater uncertainty in future revenue streams.
