Skip to main content

March 2020 / BLOG

Crisis Playbook - The Fear of Loss and Regret

Approaching the challenges and potential opportunities of market volatility

Risk happens.

Global equity markets entered 2020 in a state of Goldilocks – low interest rates and bottoming short cycle economic indicators. Markets were heavily focused on the Trump Administration’s election “put” and China’s focus on economic stability heading into 2021. Multiples drifted higher.

Then the butterfly flapped its wings and we found ourselves with COVID19, the novel coronavirus.

COVID19 introduced a risk poorly handled by monetary policy; the world’s preferred tool for economic stability. A supply shock began to spread outward from China along with the virus.  

COVID19 appears to be very contagious but relatively mild compared to viruses such as Ebola and MERS, but pandemic means suffering and death and must be urgently addressed. The immediate control of COVID19 is particularly complex in that many of its victims are either not sick, or not so seriously sick that they can be identified and isolated quickly. A more virulent virus – one that made most people extremely sick (like MERS or even SARS), might be easier to control and it therefore seems logical that a virus with these characteristics could spread far and wide. At the same time, it seems that COVID19 is not a mortal threat to most people. Obviously this is conjecture given I am no expert in virology or public health. We are tracking the evolution of this crisis and will evolve our thinking as the situation evolves.

Regardless, a virus that is novel and spreads far and wide means panic as well as volatility in asset prices as unexpected risks present themselves. We are tasked with managing a global equity portfolio given these circumstances and in moments such as this, I am incredibly grateful for our global research platform and our resources. It is a luxury to have an army of industry experts around the world, given the rich debate that comes with this support.

Our first task is to act early. We moved to raise some cash from risky parts of the portfolio as the virus began to leave China and Southeast Asia and present itself in Europe. This will allow us to redeploy cash into our best opportunities as they present themselves. We added to our financial market exchanges and utilities which should be robust, in our view, amidst rising volatility, and we have cut our stock level exposure to interest rate sensitivity. While acting swiftly amidst the panic is important, the window to panic itself is usually short-lived before prices reflect the situation and head towards extremes. We are clearly closer to extremes now versus a month ago, to state the obvious.

We are looking to understand and evaluate the risk that the global reaction to the virus could cause a credit event. Collapsing oil prices and parked airplanes will have cash flow and balance sheet implications. Credit events are what cause real damage to equity investors over the medium term and we are working with our equity and fixed income analysts and portfolio managers to assess and track these risks.

This is the time to use our imagination and think about what the world will look like in a year. Will we all be in quarantines, will air travel cease and will we be undertaking all our meetings via video conferencing? This is an extreme and unlikely possibility. In short, we do not think that the world has entered a new paradigm where we do not travel and meet others, although the market has the ability to price in this fear. Travel and meetings will be significantly down over the next six or so months, as will economic activity.

We are spending our time identifying opportunities in high quality, value creating stocks via our research platform. We have asked all the analysts to focus on those 2-3 ideas that they think can create the most economic value over the mid and long term for our clients. How to provide the best vehicle for our clients to turn crisis into strong returns requires a balancing act of risk and return, as well as the patience to time our decisions.

Regardless of today’s uncertain environment, we believe the right thing to do is to invest in our best ideas, embracing the reality that this requires difficult choices. The fear of loss is great and can lead to bad decisions. The fear of future regret is something that is harder for people to master. What will you regret in the future? This is true in life and in investing. What I have experienced over the long term is that investors regret not buying great assets in times of crisis. In the short term, anything can happen, but history tells us that in the long term, if we focus on great assets on the right side of change, we will serve our clients well.

The virus has disrupted the likelihood of modest economic acceleration in the first half of 2020 that we had expected. However, we believe that given the level of global liquidity and likely policy response, there is a good chance that economic acceleration is delayed rather than canceled. On the other side of the virus outbreak could be a significant rebound in activity. We want to be cautiously optimistic about this scenario. We are using our resources and our investment framework to do our best to make good decisions for our clients, balancing risk and return, and the fear of loss versus regret.


This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

Previous Article


Coronavirus Concerns Shift to New Outbreak Areas
Next Article

March 2020 / VIDEO

Coronavirus: Analysing the Longer-term Prospects for Asian Companies
Class I USD
ISIN LU0143563046
A high conviction global equity fund for which we seek to identify companies on the right side of change. The portfolio typically consists of typically 60-80 stocks representing our most compelling bottom-up growth ideas, often derived from technological innovation and secular disruption.
View More...
3YR Return
Fund Size


SARS Is Not a Model for Coronavirus

SARS Is Not a Model for Coronavirus

SARS Is Not a Model for Coronavirus

Drawing parallels between the two outbreaks is tempting but risky

By Chris Kushlis & Tomasz Wieladek

By Chris Kushlis & Tomasz Wieladek


COVID‑19 and Fixed Income Markets

COVID‑19 and Fixed Income Markets

COVID‑19 and Fixed Income Markets

How the coronavirus outbreak could impact bond investors.

By Ken Orchard

Ken Orchard Portfolio Manager

You are now leaving the T. Rowe Price website

T. Rowe Price is not responsible for the content of third party websites, including any performance data contained within them. Past performance cannot guarantee future results.