Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 348

Douglass on coronavirus: 'Expect volatility but don't panic'

"Expect volatility but don't panic, would be my view, because before 12 months, I think we'll be looking back, and this event will have passed."

This is the view Magellan's Hamish Douglass delivered to the thousands of investors who packed Sydney's International Convention Centre on Friday night to hear his latest update.

With fears about the coronavirus pushing stocks closer to a bear market, Douglass adopted a relaxed tone, telling investors to sit tight and take a long-term view. He told the crowd of advisers, industry professionals, retail investors and students.

"Our best view is that this may be six times as serious as the seasonal flu.

"While [the virus] is going to affect a lot more people, I think the spread may well be less because of the extreme containment measures. But with the extreme containment measures is going to come a pretty sharp economic impact around the world, which will realistically be three to six months.

"During that period, I would expect a lot of share price volatility as people react to the headlines. I think if we look a little bit longer out, this flu or pandemic or whatever you want to describe it will have its consequences. But the economic effect is likely to pass very quickly."

Douglass avoided discussing the virus for much of the presentation, devoting his time on stage to how interest rates will affect equity valuations and the rise of the Chinese consumer.

But talk of the virus, which dominated headlines for the days leading up to the event, infected audience question time.

Magellan Global Fund Portfolio Holdings, 31/12/2019

Source: Morningstar Direct

'Buy the dips'

Douglass was more eager to share his view on opportunities in the market as global banks rush to slash interest rates to fight coronavirus.

"While people are panicking and very concerned about the short-term economic impact, what the central banks are doing, and I think they're going to go further here, is they're further reducing interest rates.

"So, when we come out of this, we're going to be even in a lower interest rate world, which is supportive of higher valuations. Once you've lowered, the cost of lifting interest rates is very high. This has a very interesting dynamic for valuations when people's panic stops.

"If there are any severe dips here, my advice to people would be buy, and just expect more volatility. You're very unlikely to pick the bottom of any of the sort of ups and downs. But I expect when we get some calm water, some of the businesses will be reflecting the low interest right, which is kind of a benefit to all this uncertainty."

Magellan sees opportunity in China

Investing in China is clearly on Douglass's mind following the Magellan Financial Group’s first direct investment into the rising global power, with a 6.5% holding in Chinese online platform Alibaba. It also invests in other Chinese-market linked companies such as coffee giant Starbucks and luxury French brand LVMH Moët Hennessy – Louis Vuitton.

On stocks within his own portfolio, Douglass acknowledged that things could get ugly in the short term, but insists he is doing nothing to fundamentally change the portfolio.

"Starbucks closed half their stores in China. It's just said it's going to have a severe impact on the China business in the next three months. We know that. Its share price has been affected somewhat. But in 12 months' time, it won't have any real impact on the long-term value of a Starbucks or a Louis Vuitton."

Within the Magellan Global Fund, Douglass has taken major bets on several US tech names including Microsoft, Facebook and Alphabet, and payments giants Mastercard and Visa.

Starbucks and Alibaba both provided personalised video presentations for the roadshow. Starbucks plans to open a new store every 15 hours in China between now and 2022, Starbucks Chief Executive Kevin Johnson told the audience.

Magellan Global, Asset Allocation, 2015 - 2019

Source: Morningstar Direct

None of the Magellan Global Fund's top 10 holdings (at 31 December 2019), excluding cash, has been spared from the virus. The worst hit is Facebook, down 16% over the last month. NASDAQ is down 16.5% for the month, and the SPDR S&P 500 ETF, a proxy for the S&P 500 Index, is down 13.8%.

Magellan Global has slowly reduced its cash position over the last two years, from highs of 18.35% in mid-2018 to just under 6% at the end of 2019.

 

Emma Rapaport is Editor of Morningstar.com.au. The author attended 'The Great Repression: Magellan Investor Evening Series' on 6 March 2020 as a guest of Magellan.

Hamish Douglass is Co-Founder, Chairman and Chief Investment Officer of Magellan Asset Management, a sponsor of Firstlinks.

 

RELATED ARTICLES

SMSFs and COVID: the biggest trends in 5 charts

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.