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.

 

  •   11 March 2020
  • 3
  •      
  •   

RELATED ARTICLES

SMSFs and COVID: the biggest trends in 5 charts

banner

Most viewed in recent weeks

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Lithium's latest drop and what it means for ASX investors

Lithium's latest sell-off has punished ASX miners as prices remain hostage to shifting expectations. The key challenge is navigating a market prone to extreme volatility despite a strong case for the long-term demand outlook.

Retirement spending is not one-size-fits-all

New data challenges the idea that Australians are underspending their super. The bigger issue may be helping retirees navigate complexity, make confident decisions and use their savings to support security, wellbeing and choice.

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

The missing link in the CGT debate

A little-noticed consequence of Labor’s tax changes could have implications well beyond investors’ tax bills. The issue raises bigger questions about incentives, capital allocation and the drivers of long-term economic growth.

Latest Updates

Planning

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Superannuation

How much super should you have?

Average super balances are one of the most misleading benchmarks. They ignore your goals, spending and future needs, creating a false sense of security. Here is how I calculate exactly where I need to be at every decade.

Retirement

Retiring from work is easy, retiring into life is harder

Most people spend decades planning how to retire. Far fewer plan for what comes next. The biggest retirement challenge isn't always financial, and it often catches even the most prepared retirees completely off guard.

Shares

Right asset class, wrong index: the trap in Australian small caps

Most Australian portfolios are concentrated in large caps, with relatively little exposure to smaller companies. But what if the biggest risk isn't the economy, interest rates or valuations? For many, the risk is hidden in plain sight.

Property

Are these assets the missing piece in Australian portfolios?

Many investors remain concentrated in shares, cash and property. Despite their popularity among institutional investors, real assets remain underrepresented in many SMSF portfolios. Could they be the missing piece?

Investment strategies

The biggest risk that buy-and-hold investors ignore

Investors spend decades learning how to stay invested, yet few have a plan for getting out. When a financial goal has a hard deadline, a worked example shows why a fixed derisking schedule should outrank buy-and-hold discipline.

Investment strategies

How passive investing is driving the decline of active fund alpha

Why have active managers struggled as passive investing has surged? Research suggests that flows into index funds and ETFs are creating structural headwinds, penalising the stock-picking strategies that once generated alpha.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 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.