Financial Decisions in Times of Coronavirus


Let’s discuss how to structure our decision-making during this coronavirus uncertainty.

In our monthly breakfast seminars – Financial Markets Café – we often ask our guests to highlight what they consider to be potential geopolitical risks and triggers of market volatility.  This became increasingly important in 2018/2019 during the late stage of one of the longest bull markets in history.  We discussed the usual suspects such as Brexit, EU fragmentation, North Korea tensions and US-China trade wars.  However, a global pandemic in the foreseeable future was hardly a key talking point!

Disclaimer:  We provide guidance and personal opinions which should not be interpreted as specific investment advice!  Figures quoted up to 30 March 2020.


March 2020 will be remembered as one of the most turbulent months in the history of global financial markets.  The rapid spread of coronavirus and governments’ actions, such as monetary stimulus and travel bans, have prompted the natural instinct of many investors to reduce their exposure to equities and other risk assets.  The oil price war between Saudi and Russia, resulting in the price per barrel reaching its 18-year low point, was a major factor in the market sell-off.

A lot depends on the strategies of governments and the ability of their health services to cope with the volume of cases.  Investors – individual and institutional – are trying to make decisions based on multiple factors and a plethora of asymmetric information hitting our news channels and social media in real time.  In times of extreme uncertainty, we are observing panic-selling and opportunistic buying which result in high price volatility.

The financial shock is comparable to the 2008 financial crisis although we still have a long way to go before we are able to interpret the ongoing impact of coronavirus and the lockdowns.

The rapid movement of capital has generated extreme currency swings, whereby hard currencies, especially the USD have strengthened against emerging markets.


The VIX index measures expectations of volatility 30 days out.  The average daily closing price in 2019 was 15.4.   So far, in 2020, the average is 31.2 and in the second half of March, it fluctuated between 80 and 50.

1 year VIX chart. Source: CNBC

Normally, a daily swing of 4% to 5% would be considered extreme but such swings have been recorded on a near-daily basis over the last month.  The S&P 500 recorded its worst quarter since 1987, down 20% from its peak, and last week, the S&P 500 increased by 20% from its recent low point on Mon (23/03) to Thur (30/03).


Higher risk, equity-heavy portfolios will have felt the full brunt of the recent crash.  Even low and medium risk portfolios will have felt the impact as they hold a variety of ‘risk assets’ such which were affected by the sell off.

Financial loss (and gain) often create emotional reactions.  Imagine how first-time stock market investors in Brazil would be feeling after entering the stock market for the first time in 2018/2019. The interest rate (Selic) has fallen steadily from 14% (2016) to 3.75% (March 2020) whilst the hope of reforms (pension, taxation etc) encouraged many individuals to move away from fixed income and into equities.  After reaching a record high on Bovespa, Brazil being the top emerging market equity performer in 2019, investors subsequently endured a sharp decline with Brazil falling by a much greater percentage than the global average.

Ask yourself whether you really need to withdraw money from your investments in the short-term if this means crystallising losses.  Preferably, draw cash from your bank account or a near-cash source such as a money market fund.

Ensure you set aside an emergency fund.  This applies even more to self-employed individuals and those facing less job security.

Review your portfolio, line by line, preferably with an experienced professional, and decide how to rebalance strategically.  If you are approaching retirement or in pension drawdown, then your advisor will need to rebalance your portfolio and recalculate your cash flow – and potentially, recommend adjustments to your personal spending, at least in the short term.

Some investors may prefer to wait for a recovery outright without adjusting their portfolios.  Others may decide that it is worth crystallising certain losses and using the available cash to purchase other funds which they believe have a higher upside.  After the 2008 crash, many banks share prices declined and flatlined for years while many large tech companies grew above the market average over a decade long bull market.

Global equities and corporate bonds. Source: Quilter

The above graph shows the benefit of having a greater share of equities in your portfolio if you are investing for the long-term.  In theory, you should de-risk the portfolio accordingly as you approach retirement or another target date such as paying for children’s education costs.

We have all read the disclaimers about past performance being no guide to the future . However, financial markets are always volatile in the short term and have grown in a more steady manner over longer periods despite geopolitical shocks e.g. surprise election results and regional conflicts.


Theoretically, yes, if you have the appetite for more fluctuations over the coming weeks and months.  You may have heard analysts discussing V, U and L shaped recoveries:

Vsharp fall followed by a rapid recovery

Ua period of market plateau followed by eventual recovery

Lnot really a recovery, just a long-term plateau or slow growth

Some analysts believe that markets have undershot reality, due to mass panic-selling, whilst others believe there is more downside on the horizon.  As per the introduction, with so much information flying around, we are bound to hear conflicting opinions (even in periods of stability!) and many ‘expert commentators’ are basing their views on their own emotions or their biases to certain fund managers or investment banks.  A US equity fund manager making an appearance on CNN is hardly going to discuss the potential of  emerging market bonds, right?  And I wonder what asset class a property fund manager will tell you is the best investment whether we’re in the middle of a credit crunch or a boom…

A common and safer strategy is to phase your money into equities and other risk assets over time; buying a selection of funds at regular intervals at different price points and taking a long-term view.

FTSE 100 chart

The FTSE 100 is truly a global index with some of the world’s largest banking, energy,  mining and pharmaceutical multinationals.  It reached 7,778 points, its record high on 18 May 2018 and suffered a sharp fall to reach 5,563 on 30 March, partly due to panic-selling.  Step back from the numbers and consider the operations and scale of the constituent companies like  BHP, HSBC, Shell and Unilever.

Demand will eventually return and stabilise slowly once lockdowns come to an end. We expect many companies to undertake restructuring having learnt valuable lessons from this crisis. Only time will tell how effective the stimulus packages are on consumer demand and company balance sheets.

There may be a lot more bad news to come and indeed, it could fall below 5,000 again (it did temporarily in the 3rd week of March) but consider the strategy of phasing money into the market over time – whether you buy ETF trackers, investment funds or direct shares.

The same advice applies to Brazil and the potential buying opportunities of shares and funds.  Current accounts and CDBs are paying less interest than ever and therefore you would benefit from a diversified portfolio and phasing some of your cash into the market with a long-term view.  There are other interesting asset classes in the fixed income and multiasset categories.  On a final note, I mentioned the concept of portabilidade for private pensions (previdência privada).  Now would be a good time to review your previdênciaprivada and potentially migrate to another provider whilst adjusting the asset allocation.


Two questions which I’m hearing more frequently:

  • “Is it a good time to send money to Brazil?”
  • “Shall we get our cash out of Brazil as the Real (BRL) is tanking?”

Answer in most cases:  “It depends on your needs, the urgency and purpose of the transfer”.

If you have cash in USD and want to build up cash in BRL or buy a property – yes, absolutely transfer money into Brazil.  Could USD/BRL go from 5,2 to 6,0?  Possibly, who knows?  It depends on many factors like interest rates, government policy, speculation, coronavirus data etc.  Trying to time the exact moment is a risky game.   The property you want to purchase in Brazil has became at least 25% cheaper over the last year in USD terms.  You would have gladly taken 5,2 when it was 4,0 last year, right?

USD/BRL chart. Source:  Bloomberg

Fact – the Real is a volatile currency.  As per the graph, USD/BRL was 3,1 in 2017 with less volatility then 2019/2020.  In times of crisis, emerging market currencies tend to weaken given the flight of capital to safety, notably US treasuries.

A client decided to transfer his BRL to Sterling (GBP), taking a painful hit on the exchange rate.  In the last 12 months, BRL has fallen 20% against GBP – but he wanted to invest in a pension and start a business in the UK.  There was urgency and purpose.  If BRL were to flatline or weaken over the next 12 months, he would simply be waiting without putting the capital to use.


What could be more exciting than using quarantine to bring your tax admin up to date?  In Brazil, key deadlines have been extended, namely:

  • Tax return (IRPF-2020).  Deadline moved from 30 April to 30 June
  • Central Bank overseas asset declaration (DCBE). Deadline moved from 5 April to 1 June.

For US persons – the IRS filing date has been extended to 15 July.  Remember to declare foreign accounts on your FBAR form.

Now that many families are under one roof, it may be an appropriate time to enjoy a detailed discussion about family finances.  How about starting with the potentially not-so-comfortable topic of inheritance and succession planning? How much money would families save in tax if they didn’t perceive it as being taboo and confronted reality well in advance of the inevitable?

Inheritance tax planning in the UK and Brazil requires careful professional guidance especially if families and assets are divided between both countries. In Brazil, death taxes are applied at state level and vary significantly between different states.  Double taxation is an undesirable outcome which can be mitigated by taking action in advance.  I reiterate, seek independent advice rather than a tied product-salesperson otherwise, you may end up paying high annual fees and eventually, more than 40% tax on assets which you inherit.

Consider which tax-efficient savings vehicles you wish to increase, hold or surrender and whether the tax benefits are recognised by the tax authorities in your country of residence e.g. ISAs and private pensions (UK), previdência privada (BR) and 401K (US).

For example, if a US person, resident in Brazil, were to sell her primary residence, Brazilian capital gains tax of 15% is waived if the proprietor purchases a new property within 180 days of the original sale.  However, this Brazilian exemption is not recognised by the US and the individual would be taxed on the gain. Uncle Sam… c’est la vie!


Many expats and geographically-mobile executives manage the number of days spent in certain jurisdictions to optimise their tax position.  Travel restrictions and lockdowns may create undesirable residency scenarios with harsh tax implications including double taxation on income and gains.

The UK taxman allows 60 additional days for extraordinary circumstances.  There is no precedent of a global epidemic of this nature with quarantines and international border closures.  Will HMRC extend the day count if lockdowns last longer than expected?  Check in advance whether you need to file more than one declaration.

There are further tips in our two articles about organising your financial planning in 2020.  All 10 points are important and relevant, regardless of the current scenario:

Tips 1-5   Budgeting – Saving – Private pensions – Banking costs – Money transfers

Tips 6-10  Tax return – Central Bank declaration – Fund platforms – International asset consolidation – Insurance

For specific queries, please contact us here.

Stay safe and please look after yourselves and your families!


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