4 common questions investors are asking during the COVID-19 pandemic

No question that the timing of this pandemic is serious given already heightened concerns about a global economic slowdown. Europe was already on the cusp of a recession when events began unfolding, and Japan's economy suffered before factoring in the potential impact of the COVID-19. While there will continue to be some loss of activity, once the virus levels off, subsequent quarters would see economic rebounds as business operations and consumer activity normalizes. If we look at other events like SARS and MERS, for example, the impact of COVID-19 could dissipate within two quarters. And while the full impact of the virus on financial markets is impossible to predict, investors do have options.

The short answer is yes. Trying to protect yourself by attempting to predict the ups and downs of the market (and moving in and out of them) could mean missing out on long-term growth. The best days for investment growth often come after the worst. History has previously shown that after bear markets, Canadian equities recovered and resumed their upward trend. That’s why staying focussed on long-term investment goals is important as those who sell during a bear market could miss out on more significant returns during a recovery period. Investors wanting to build longer-term wealth should consider investing with a view beyond the immediate discomfort of current events affecting global markets.

Where things like the U.S. election, trade disputes, a possible recession and geopolitics were ‘identifiable risks’ at the beginning of 2020, unpredictable events such as the COVID-19 are impossible to quantify and a good example of uncertainty. For situations that fall under the ‘uncertainty’ category (such as the COVID-19), however, we’ve built resilient portfolios that take advantage of our true diversification approach. This means combining asset allocation, factoring in diversification across asset classes, geographies, risk factors and macroeconomic environments, along with behavioural finance considerations.

While the market volatility over the past two weeks has been difficult, our advice is to speak with your advisor about whether a more diversified portfolio that is not overexposed to adverse events (and one that is prepared for the risks and uncertainties currently impacting global financial markets), is a desirable option at this time.