A reference that those of you with a religious education will recognise as apocalyptic, the rider on the pale horse of Revelation dispensing Plague amongst the weapons of Death. An idea that has not dated much in 2000 years.
I have been preparing material for my March newsletter but all the reference material I have on hand was researched by people looking at data for the last quarter of 2019. There is no doubt useful evidence about the usual changes of direction is asset allocation to be reviewed, but the story that overwhelms all that is obviously the Covid-19 outbreak. The question for the moment is not where to invest, but do we want to be invested in global markets at all?
As a teaser for my March newsletter (subscribers only), I can tell you that the basically sceptical political opinion that I have referred to in the past which in essence is that the US wants a war with China is now being adopted as an economic argument by a well regarded economist. Add to that the locus of the virus outbreak (and the unsurprising propaganda that this is CIA sponsored germ warfare – being tested outside the US for a change), one has to be concerned about the potential impact for markets that are priced on the basis of everything going well or even better than it has been.
In such a situation, I am asking myself, do I want to buy equities with cash on hand? No, to be honest. Do I want to sell existing holdings to secure past gains? A little bit, but I know very well the risks of being out of the market and being scared of getting back in until the best gains have passed one by – I am no less human than anyone else. As long as I have plenty of cash, I am happy to let the portfolio take a hit short term.
What is new is that for the first time in my long investment life I am investing in physical gold, not the actual raw metal, but using exchange traded commodity shares. These are a specialist and potentially risky asset, so not recommended for non-professionals, but there are other ways to access commodity price movements if you see the logic of using that as your diversifier on this occasion. Using funds that invest in gold miners is one way – that also has pros and cons. Something to think about?
Subscribers can call me to discuss this in more detail.
Perhaps the virus will die out quickly like SARS and MERS. I suggest you watch your portfolios more often than usual and if you are using an IFA, get their take on the issues raised. Not my standard guidance and not something that will be good for your neves as a permanent strategy, but these are unusual times.
There is some good news in that the main central banks and political powers appear willing to pump credit into the system. We will pay for that later!
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