The long-range view in the financial markets is not quite so crystal clear as it is in the mountains. Since visibility is poor, volatility is heightened. The reason for this is the lack of clarity over the duration and extent of the growth slowdown caused by the spread of coronavirus. In our last Market Comment, we estimated an impact of some -0.5% to -1.5% for Chinese economic growth compared to the previous year, depending on the duration of the problem and for the global GDP growth by around -0.25% to -0.5%. Due to the lack of a clearer long-term picture, it is perhaps not a bad idea right now to retain a more defensive stance with reduced volatility, at least until the fog starts to clear in the markets. We are continuing to overweight investment-grade bonds in preference to high-yield bonds, along with a slight dollar overweighting on the currency front, a regional overweighting of US equities and a strong overweighting of equities with below-average volatility.

Unfortunately coronavirus remains the dominant market theme. Because a phenomenon of this magnitude has not yet been seen in the era of globalization, its repercussions cannot be estimated and quantified with any great degree of precision. While possible scenarios can be discussed, they should not be interpreted as forecasts. The repercussions of the virus for the global economy are playing out in three dimensions. While the negative economic impact of the outbreak should be offset by actions taken by governments and central banks, the strength of their response will be key. Either way, gold continues to serve the purpose of diversification, while at the same time benefiting from a further decline in interest rates.

The turbulent performance of Bitcoin over the last year has brought this cryptocurrency to the attention of the wider public. But this currency has actually been around for almost ten years, and an estimated 1,600 other alternative currencies have also sprung up in the meantime. The question is often asked whether these constructs – which only exist in the form of digital code – can really be considered currencies at all in a way that bears comparison with the dollar, euro or yen. We will return to this question later in this article. First of all it is worth establishing what actually lies behind cryptocurrencies such as Bitcoin, Ether and Ripple.