The near-term outlook remains uncertain due to limited ability to project the coronavirus pandemic’s end, said Julius Baer’s Asia chief investment officer Bhaskar Laxminarayan, who suggested investors instead take advantage of the volatility.

«Initially was seen as a problem that could be contained in China. We now know that the spread to be stopped that easily. We are not near the peak at this stage. As the virus travels around the world, chances are there’s going to be more and more negative news,» said Laxminarayan during a media call.

«Everything as far as the coronavirus is concerned is a guesstimate. Markets do not like guessing things. More volatility will be created by this risk and this is unavoidable.»

Laxminarayan called this week’s market plunge a near «Black Monday» event with all-time top-10 declines registered across major asset classes including oil, global equities and the S&P 500. 

Buy Volatility

Despite market uncertainty, Laxminarayan observes healthy trading activity and underlines the usage of structured products – complex structures often involving derivatives and bonds – as a major opportunity. Such products have long been popular in Asia often due to its ability to generate income and provide embedded leverage for a diverse range of market views. 

«Some of the best opportunities today are in the structured products area where volatility provides you with great entry levels in core assets that you always wanted to own,» he explained during a media call, naming the usage of such products as the second biggest opportunity set. 

Asset Allocation

Still, with more turbulence underway Laxminarayan believes that the first priority is to focus on maintaining strategic asset allocation, the broader guidance for portfolios or the «comfort position» for investors where they the portfolio is not taking too much or too little risk between stocks, bonds and alternatives.

«What is straegic asset allocation? If I did nothing, what would my comfort position be in the long-term?» he explains. «In such uncertain times, your best bet is to go back to that base case scenario.»