The "scare" reaction in the markets due to the impact of the spreading coronavirus pandemic has actually removed a great deal of "froth", and returned risk markets to fairer valuations, in the view of George Herman, director and chief investment officer at Citadel.
In his view, volatility will, however, remain in South Africa long after the world has come to terms with the coronavirus.
While history has shown that stock market concern around epidemics tends to fizzle out after a few months, no one can really predict how events caused by the impact of the spread of the coronavirus will unfold, according to Andrew Evans of the Sanlam Active UK Fund.
Long-term intrinsic value
He adds that investors should keep in mind that macro events, even ones as scary as the current pandemic, don't usually have a material long-term impact on the true (intrinsic) value of high-quality companies.
Maarten Ackerman, chief economist and advisory partner at Citadel, says, given their growing concern over the increasing threat of a global recession, at the beginning of the year they had already begun to "de-risk" client portfolios.
"The challenge of the coronavirus means, however, that we have also had to reconsider our forecasts for this year and make further adjustments to client portfolios, which we will continue to do as needed," he adds.
Avoid knee-jerk response
Herman says that, amidst increasing levels of volatility, sticking to your long-term investment roadmap and process, and avoiding the urge to make knee-jerk decisions is now more important than ever.
"Remember, however scary this volatility may seem, it is a natural part of markets and in fact is the exact foundation of long-term investment opportunities," says Ackerman.
Nigel Barnes, head of business development at Denker Capital, says it's difficult to know what effect the coronavirus will have on investment returns over the medium term.
"It's in times like these that it's more important than ever for portfolio managers and investors to stick to tried-and-tested investment philosophies," says Barnes.
"Only when the business is attractively priced relative to its long-term return potential will we invest."
Despite the current uncertainty, he believes that low prices provide buying opportunities.
Pete Armitage, CEO and co-chief investment officer at Anchor Capital, says its base case is to avoid getting sucked into the panic or rushing in to buy assets that look to be unreasonably cheap.
"It is extremely likely though that we'll start to see opportunities to buy companies whose businesses are largely unaffected in in the long run at absurd valuations if we remain patient," says Armitage.
"Nobody can predict what happens next and investors should be prepared for continued volatility."
This too shall pass
Sanisha Packirisamy, economist at Momentum Investments, also expects that opportunities will likely present themselves to enhance long-term returns by taking advantage of asset price dislocations during market overreactions to the virus on the back of sentiment-driven market behaviour.
"Selling into market weakness locks in potential losses and then also exposes investors to the risk that they miss any eventual rebound in markets if they have not reinvested by that point," she says.
"We are also unwavering in our belief that a diversified portfolio is the most efficient way to achieve the long-term investment outcomes for our clients – even more so in uncertain and volatile market environments."