CEO understands fragile sentiment as markets collapse but urges investors to re-affirm their long-term objectives
Expectations of a quick market recovery are unrealistic but investors who demonstrate courage and patience will be rewarded over the long term.
That’s the view of Capital Group chairman and CEO Tim Armour, who believes markets will eventually rebound from the COVID-19 crisis and life will return to normal.
The sense of panic is understandable, he added; the disease is new and it’s having a significant impact on the global economy. His initial thoughts are with the families affect and the human toll this is taking across different continents.
From a markets perspective, however, there are reasons to be resilient. Armour stressed that there is a long history of bouncing back from adversity, having personally worked through the U.S. savings and loan crisis in the late 1980s, the tech and telecom bubble that ended in March, 2000, and the Global Financial Crisis of 2008 and 2009.
“Each of these crises was very different, with very different underlying conditions,” he said. “But in each case, the markets bounced back. I believe the markets, and great companies, will survive the current market decline and rebound.”
China appears to have some semblance of control over the virus and Armour said the global spread will peak sooner than many anticipate. He also took comfort from the willingness of central banks – in particularly the Fed – to take aggressive action after cutting interest rates by 5- basis points. Another cut next week is widely expected by the markets.
The first bear market in more than a decade is being accentuated by fully valued equities and the looming prospect of a combative U.S. election.
He said: “While the pace and magnitude of the recent volatility can be unsettling, it is not entirely surprising. Investor sentiment is fragile and will likely remain so until the spread of the virus slows. In times like these, resilient investors who can demonstrate patience can be rewarded over the long term.”
Nevertheless, the situation is expected to get worse before it gets better. Sticking to long-term objectives and being in close communication with your advisor is a must, according to the industry veteran. Capital expects to be dealing with the virus and its aftermath for “possibly a year or two”.
“In periods of declining markets, emotions run high, and that’s natural and understandable. But it is exactly in times like this that a long-term orientation is important. Based on my prior experiences and what has historically occurred, I firmly believe markets will rebound and life will return to normal. Now more than ever, investors should be in close communication with their advisors, reaffirming their long-term objectives.”
