Like many around the world, we are saddened by the loss of life and disruption caused by the outbreak of the coronavirus (COVID-19). While the outbreak has already impacted equity and fixed income valuations, we continue to believe it is unlikely these effects will persist over the long-term or impact our ability to fulfill our obligations to our clients. Industry experts are confident that the virus can be contained, but uncertainty remains regarding its magnitude and duration in the near-term.
As we update our initial assessment of the coronavirus, a few things have changed.
- The spread of the virus is making it more likely the negative economic impact extends to the rest of the world.
- Statistically speaking, the odds of a person contracting COVID-19 remain low.
- However, the psychological impact creates meaningful economic disruptions such as global tourism and trade, as well as for consumption through self-imposed social distancing. This community-spread effect creates new, additional wrinkles to the supply chain and trade disruptions.
While the spread of this new virus appears likely to impact short-term economic results, it’s more challenging to assess the potential longer-term impact. We are evaluating individual holdings to assess their ability to weather shorter-term macro pressures such as lower interest rates, supply chain disruptions, and subdued demand. We are also factoring in various scenarios to identify where, if at all, the current disruption may create attractive investment opportunities for our portfolios.
Against this backdrop, we may lean into opportunities where we believe the market has overreacted. As with all portfolio changes, we will continue to rely on rigorous debate and the collective judgment of our Investment Committee. Any changes we make will likely be gradual and incremental, giving us the opportunity to continually revisit and retest our thinking. We will continue to assess this developing situation in our efforts to deliver lasting value to our clients.
Business Impacts: Prepared for Contingencies
Other than postponing planned meetings, the virus has not had an impact on NWCM’s operations. Our staff have been making greater use of conference calls in order to protect the health of our workforce. NWCM also has a robust business continuity plan with backups, redundancies, and remote work operating capabilities. We test them regularly and are prepared to implement a remote working environment if there is a serious outbreak of the virus in Portland (where the majority of our employees are located), Seattle and/or Phoenix.