Our fear that this market sell-off is different has come true as oil prices drop and Italy shuts down
Coronavirus continues to infect market prices
- Oil prices plunge overnight by nearly 30% as Russia and OPEC fail to agree on production cuts
- The economic repercussions from the Covid-19 will come to light in the coming weeks and months
- For investors that have structured their portfolio well then the only thing to really do is sit tight
- Trying to be active in choppy markets could cause even more damage
Our view of nearly two weeks ago that the market impacts of the Coronavirus would linger has unfortunately come true. We feared that other developed nations could take the same drastic measures to contain the Covid-19 virus by shutting down parts of the country as China did, and indeed this has happened in the North of Italy with a travel ban. To make matters worse, OPEC and Russia have been unable to come to an agreement over cutting oil production in the face of falling prices. Now Saudi Arabia has doubled down and is planning to expand production in an attempt to punish Russia and to wipe out the US shale players, sending oil prices overnight down by nearly 30%. This is the worst price since the first Gulf War.
We do not suspect that this morning’s stock market fall will be the bottom, as the economic repercussions will come to light in the coming weeks and months. There remains the possibility that even more economically significant regions could face a similar fate. What do investors do from here? For most, it’s probably too late to panic. For investors that have structured their portfolio well then the only thing to really do is sit tight. Markets will recover over the medium to longer term which is what investors should be targeting. In the meantime, trying to be active in choppy markets could cause even more damage.
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