Wild fluctuations in stock markets resulting from the coronavirus pandemic have tested the resolve of many investors.
“We saw markets drop more than 30% in a month, the quickest decline of that magnitude on record,” says Jody Jonsson, a global equity portfolio manager at Capital Group. “This is a truly global downturn that has impacted virtually every sector. It can be very disorienting, and I think the market is having a hard time sizing the depth and duration of the recession that is coming.”
With many areas of the global economy coming to an abrupt halt, markets have see sawed between gains and declines as investors weigh the potential impact of massive stimulus initiatives by governments and central banks.
So, where are the world’s stock markets headed from here? In a recent call from their home offices, Jonsson and equity portfolio manager Joyce Gordon, both veterans of numerous bear markets, shared their perspective on weathering the recession and positioning portfolios for the future.
How long will this bear market last?
Jonsson: The recovery may go the way the virus has gone: from east to west. In fact, we can see that China’s market has started to recover already — down about 10% in the first quarter. Once the coronavirus case count levelled out, the market began to recover. I believe that will be the case for the U.S. and Europe as well. When does the curve flatten? As an investor I want to anticipate when those numbers will flatten. The key is to do what we always do: maintain our focus on the long term. It can be very difficult in times like these to look past the next few days. To the extent you can stretch your time horizon to months or years, I think that helps put you in a position to capitalise on the best long-term investment opportunities.