Black Monday in equity markets around the world as a result of the coronavirus expansion. All companies are in the red and to the point that they have amortized in a single day all the profits that had been generated since the beginning of the year. Where, the Korean has dropped 3,5%, while the Chinese has lost more than 15% since this high-emergency health process began. With regard to the European equity markets, at the beginning of the week they have left a measure of around 4,5%. Something that has not been seen since Brexit and that has led to a real panic scenario among small and medium investors.
The coronavirus crisis is manifesting itself more than ever in the financial markets, it is special with the cases of Italy, so that in this way a situation of enormous volatility is being shown. Many funds are targeting financial assets that are safe and act as a refuge from a worsening crisis. In what constitutes a litmus test for equity markets around the world due to the fact that a lot of money can be lost in the operations that have been carried out in the weeks leading up to this Black Monday on international stock exchanges.
Within the variable income of our country, there have been values as in the specific case of the airline IAG that this past Monday nothing less than 10% of its valuation has been left in the financial markets. That is, if you had invested 10.000 euros, by now you will have suddenly lost 1.000 euros. Of course, in case you have executed the sales on the same Tuesday. As is happening with the values linked to transport, hotels, tourism in general, oil companies, luxury consumption and cyclical companies. That to a lesser or greater extent, more than 5% have been left at the beginning of the week in a day that will go down in history due to the verticality of the declines in these financial assets.
Panic in the bags: what to do?
Monetary flows are seeking refuge in gold, with the ounce rising more than 4% until it is very close to the levels it has in the $ 1.700 per troy ounce. And everything indicates that this trend will continue in the coming days. So it can be a clear alternative in investment for small and medium investors. Given the security offered by this raw material in the face of what may happen in the coming days. From this point of view, investing in the yellow metal can be very profitable due to the potential for revaluation that it can have from now on. In particular, given a worsening of the health situation in the world and of which the financial markets are very expectant.
Gold, cannot be forgotten, is the great beneficiary of this new situation and there are already many investment funds that are targeting their positions in order to make their monetary assets profitable. As has happened historically with this important financial asset. Where interest rates are very low and the prospects are not for strong rises either. As a consequence, the opportunity cost has been greatly reduced and if we add to that the costs of carrying out the debt transaction and the potential risk of long-term investment with a totally flat yield curve, these are reasons enough to start thinking that Central Banks are going to limit their gold sales to the maximum and it is even reasonable to think that they could be net buyers due to factors such as protection against inflation.
Diversify investments
Of course, having good advice and properly diversifying the portfolio is one of the best guarantees for the success of operations on the various financial assets. With a very well defined goal and that is that all this must have the objective of avoiding the uncertainty that is being generated in the world as a result of the expansion of the coronavirus. It is not the right time to position yourself in a single financial asset, but on the contrary it is to distribute it among several and, if possible, they are very safe over other more aggressive considerations. Not surprisingly, you are playing a lot of money at this precise moment. Where you can leave a lot of euros on the way if you don't make the right decision.
While on the other hand, correct advice can also benefit you in the results of your investments, at least in what refers to the short term. What is where risk in movements it is more latent before the latest news about this virus that is affecting a good part of the financial markets. In this sense, your bank will always be able to advise you what you should do on these special days. Given the unnecessary risk that you will invest your savings in the least indicated products at the moment. Not only with regard to equity markets, but also fixed income or even alternative investment formats. So that in this way you can protect yourself more effectively and above all by preserving your positions more effectively.
Funds linked to volatility
This is one of the products that can be more profitable for you due to its special characteristics, although they are not without risk, especially if the trend changes significantly from now on. In order for you to channel this more specialized investment, you should know that there are absolute return vocation funds such as Amundi pioneer that meet these sharp objectives. Like the volatility funds on the MSCI World that in any case can add a lot of value as a tactical position in this instability. Of course, there are also others that have been prepared in recent years by the most important fund managers, both national and outside our borders.
In any case, it is not a conventional investment, but on the contrary, it requires more special periods of permanence. That is, aimed at the shortest deadlines and not with the vocation of having them for a long time since they can give you more than one negative surprise from now on. At the end of the day, it is about weathering this storm that is fully affecting stock markets around the world, and especially if this scenario worsens in the coming days or weeks. In this sense, investment funds linked to volatility can be very useful to place the money in a scenario as adverse as the current one.
Hiring local bonds
It is very interesting that you can combine global equities with other financial assets, such as those represented by national bonds. Because with the application of this unique and basic investment strategy, it can continue to perform well in these times of general declines and continue to perform well. Especially if this tactic is accompanied by an important and balanced diversification in our investment portfolio. With one exception at this moment, and that is the Italian bond that may be more vulnerable than the rest as the transalpine country is the epicenter of the virus in the old continent.
On the other hand, these kinds of financial products are more defensive in adverse settings for equity markets, as has happened in previous years. Although knowing in advance that its profitability is certainly not going to be spectacular. Not much less. If not, on the contrary, it will move in a very narrow fork that oscillates between 1% and 3%, in line with what the different banking products intended for savings mark. For example, fixed-term deposits that offer an average and annual return of around 0,90%. As a consequence of the cheaper price of money by the European monetary authorities.
Gone is the period when the stock markets were not giving importance to the coronavirus. But this management strategy has been blurred on this black Monday for investors. Except for those who have made sales on credit or contracted reverse products. Both in the stock market and in other financial products, such as investment funds. Operations that in the current context are but very profitable for the interests of small and medium investors. To the point that at the beginning of the week they have been able to verify how their investment balance has grown notably, although with the aim of making the exits since they are movements that carry many risks. Perhaps not acceptable for a large part of stock market users due to the complexity of operating in short positions.