Imperium Capital Publication

Global Matters Weekly – 23 March 2020

(iI) Liquidity of Property
by Jackson Franks

As we temporarily enter a new way of living, I spent Wednesday night giving my grandparents a step by step guide on creating a Skype account. After a good 45 minutes (which felt like weeks) and a lot of patience we managed to complete the process. They couldn’t quite believe that they could see me and me them as we sat down to eat dinner together via Skype. With my Grandpa’s interest in the financial markets, especially the real estate sector, we had a lot to talk about considering six UK open-ended property funds were suspended last week with the expectation that others will follow this week.

Market Snapshot

  • The rapid spread of COVID-19 has led to the continued lockdown of parts of Europe and the US, although a steady slowdown in cases is being seen in Italy
  • Global equity markets declined 12.2% over the past week
  • Brent crude fell 20.3% ending the week at $27.0 a barrel
  • Gold fell 2.0% ending the week at $1498.7 an ounce

Viewpoint – March 2020

After a period of remission verging on complacency, markets were dramatically infected by coronavirus in the final week of February, with the sharpest weekly fall in equities since the financial crisis. The trigger was the realisation that the spread of the virus beyond China, and in particular into Europe, was not only inevitable but immediate, with Italy’s economic
heartland suffering an extremely serious outbreak which is still in its early stages. Taking a line from the damage caused to China’s economy, investors began to discount a very sharp contraction in economic activity in Europe, and globally, as the virus continues its inevitable spread, now in 86 countries and rising. The impact on economies is immediate, with factories closed, supply chains interrupted, travel and leisure activities curtailed, services withdrawn and large parts of the worst affected countries, China, Italy, South Korea and Iran (and the expectation of many more to follow), in effective lockdown.

Global Matters Weekly – 16 March 2020

The Bear Necessities
by Robert White, CFA

“There are decades where nothing happens; and there are weeks where decades happen”. After the longest bull market on record finally came to an end last week, Lenin’s famous quote concisely sums up the current mood among investors. The S&P 500 officially moved into bear market territory on Thursday after it breached the 20% level in a record 16 sessions of trading. Such price action reflects the tragic reality that the coronavirus has now caused the death of thousands globally, and the focus quite rightly is on limiting its human cost. Amidst the barrage of negative news, it is important for long term investors to act rationally and take account of the situation as it develops.

Market Snapshot

  • The rapid spread of COVID-19 caused significant portions of Europe to lockdown
  • Global markets declined 12.4% over the past week
  • Brent crude fell 25.2% ending the week at $33.9 a barrel
  • Gold fell 8.6% ending the week at $1529.8 an ounce

Global Matters Weekly – 9 March 2020

Tipping point
by Alex Harvey, CFA

When the seeds of the Arab Spring were sown in 2010 in a market in Tunisia, few would have foreseen the chain of events that followed. The resulting wave of civil protest and unrest that rippled across north Africa led to the collapse of regimes and leaders that had been in place for many decades, most notably Muammar Gaddafi. Roll forward nearly a decade and 9,123 kilometres and another otherwise unremarkable marketplace finds itself at ground zero for the current bout of volatility in markets. In reality there is little to link these events, but the pattern of snowballing and onward contagion is perhaps not so different as camels’ backs get broken.

Market Snapshot

  • Global equity markets volatile in response to the coronavirus
  • Bond yields tumble as investors go risk-off
  • Brent crude tumbles around 30%, currently at $36 a barrel
  • Gold rose 5.6% ending the week at $1665.9 an ounce

Global Matters Weekly – 2 March 2020

Breathe, think, act
by Lorenzo La Posta

When markets panic, the only investment mantra I believe in is “breathe, think, act”. Sell-offs can provide fantastic buying opportunities, but elevated risks often accompany them. After last week’s sharp drop in global equities, is this now a good entry point or is this a falling knife we do not want to catch? Are markets overly worried about coronavirus or are more negative prospects not yet priced in? We believe that, at these levels, risk assets offer attractive long-term expected returns, but more volatility is likely to come.

Market Snapshot

  • Rising COVID-19 fears caused the fastest market correction in history
  • Global markets declined 10.8% over the past week
  • Brent crude fell 13.6% ending the week at $50.5 a barrel
  • Gold fell 3.5% ending the week at $1585.7 an ounce