The beautiful game

The beautiful game

19 February 2020 will go down as the date when many global share markets peaked. Also, on that day was a Champions League (soccer) match between the Bergamo team, Atalanta, and the Spanish team, Valencia, at the famed San Siro Stadium in Milan. Attending were more than 40,000 Bergamaschi, making the 55-kilometre trip to watch their beloved team. Many unknowingly had the Coronavirus, as cases were being reported with great frequency some days later; and Bergamo soon became the worst hit Province in Italy.

With a 4-1 victory to Atalanta, and lots of celebrations at close quarters in the stadium and at the pubs, restaurants and clubs afterwards, it seemed likely that COVID-19 was let loose, with some of the 2,500 Valencia fans, many who had taken the two hour flight to Milan, as well as one third of the Valencia team, picking up this biological time bomb, according to the Bergamo Mayor, Giorgio Gori.

Fast forward six weeks, and by 31 March 2020 we have a situation on our hands where Italy has reported 106,000 infections and 12,500 deaths, while Spain has reported 96,000 infections and 8,500 deaths. At the time of writing, they together have accounted for nearly one quarter of the global infections (of 858,000) and one-half of the global deaths (of 42,000).

The team at Montgomery Investment Management have been actively analysing a huge amount of Coronavirus related data. The graphs below produced by Tim Kelley show that if there is one piece of relatively good news, it is that there is a decelerating growth rate in those countries which take quarantining seriously. Note, the negative growth rate in the second graph below is where recoveries exceed new cases.

Unfortunately, it seems the UK and North America have been slow to move, and we are looking for the numbers in the US particularly to get substantially worse over the foreseeable future.

And for that reason, we have continued to remain conservatively positioned in terms of our cash holding and are only deploying funds opportunistically when selected high quality stocks become (very) cheap.

To review our current positioning across the Montgomery strategies, please see Dean’s article: Your questions: Fund Positioning

Source: Johns Hopkins CSSE dataset on GitHub

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Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.