Not only is coronavirus dominating public life, the economy and life at home, it has also triggered panic on the financial markets. The price falls in recent days are amongst the greatest in stock market history. The last time such a dramatic crash occurred on the stock markets was in 1987.
Equity investments suffered the biggest hit. The losses on the Swiss equity market were somewhat lower than those on the markets of other industrialized nations. But the financial markets hardly differentiated, and practically all asset classes suffered from panic-driven trading. There has also been a slight fall in the value of bonds and gold recently. They usually gain in value when equity prices plunge.
Automated trading and stock market purchases made on credit may have exacerbated the significant fluctuations on the stock markets in recent weeks. However, the extraordinary market turmoil was undoubtedly triggered by the spread of coronavirus in Europe and the USA. This means the fears we have been expressing since January have now been confirmed – the risks to the global economy presented by the virus has been underestimated. Even though we did not predict the scale of the crisis, our cautious positioning of recent months has proven correct. More specifically, we gradually reduced equity investments in January and February and increased our allocation of government bonds from industrialized nations.