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Update on the current correction in Equity Markets

Friday, February 28th, 2020
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We are seeing a major correction occurring in all global equity markets as investors try to assess the impact of the coronavirus on corporate profits. The Dow Jones is now down over 12% from the peak it reached on the 12th February as near panic grips many markets.

The extensive factory closures and travel bans that we are seeing in many parts of the world due to the coronavirus outbreak will no doubt have a real impact on global economic activity and this will in turn impact the profits of many companies.

These types of markets, where uncertainty and fear are leading to many investors selling indiscriminately – while not that frequent – are nothing new. In these types of markets “the good the bad and the ugly” all get sold down heavily as investors reduce their overall exposure to the equity market.

In times like these, there are a few things to bear in mind:

So how does this impact IML’s portfolios and what are we doing about it?

Clearly this will be a negative month for investors with losses recorded in every sector. IML’s portfolios will also be negatively impacted by the current correction as all stocks get sold off heavily:

Conclusion

Clearly this is very painful for all equity investors, many of whom have benefited from the good gains seen in recent years. We have been through corrections like this before and will remain disciplined in our approach to investing at all times.
We draw investors’ attention to Lesson 8 of our recent book, 20 Lessons from 20 years for further detail and thought on this matter.