Ignore ‘short-term noise’ like coronavirus, Hong Kong protests and focus on US health care stocks, says Charles Schwab

Investors should dismiss “short-term noise” like the anti-government protests that have rocked Hong Kong and the outbreak of coronavirus if they want their portfolio to work for them in the long run, according to Charles Schwab.

The American bank and brokerage recommended US health care stocks as the only reliable long-term investment.

The civil unrest that has crippled Hong Kong’s economy and the current Covid-19 crisis are merely “noise” in the market and investors should not let “knee-jerk reactions” affect their long-term financial planning, said Michael Fong, managing director at Schwab.

“We feel that focusing upon long-term is much more important than letting short-term noise impact decisions,” said Fong in an interview in late January. “Take away the noise and actually focus on fundamentals. [Investors should] focus on looking at what they’re trying to achieve as a long-term goal.

“That, actually, is a very important element of financial planning. In reality, that is [important] when issues like this come up, like the virus or any other issues in the market.”

Fong’s view is echoed by Ricky Tang, deputy head of multi-asset product, North Asia, at Schroders. He said investors should avoid “knee-jerk reactions” like the sell-off sparked by coronavirus in sectors like consumption, and the rush to buy pharmaceutical companies, seen as benefiting from the outbreak.

“These crowding or herding behaviours tend to be short-lived, and ultimately reverse themselves as reality sets in,” said Tang in an email last week. “As such, rather than chasing the crowd and trying to be part of the herd, which could potentially infect your portfolio with poor performance, the wise response to these market volatilities is to focus on long-term outcomes, and ensure your portfolio has some investments which are more resilient to smooth out the volatility.”