Coronavirus Market Update

Our thoughts and observations...

Coronavirus has impacted market sentiment. Our thoughts and observations are as follows.

From an economic perspective, it is certainly true that the virus will affect both demand and supply around the globe. 

However, central banks will move to offset these effects by creating financial stimulus – as we have seen in China with the availability and cost of credit.

Our expectation is that the hit to the economic data as a result of the virus will get worse before it gets better.

We believe the current volatility in stock markets is therefore transitory and that liquidity and other supportive central bank and governmental measures will act as a stabilising mechanism.

The analysis by Charles Schwab below shows, that since 1981, there have been 13 major viral outbreaks recorded globally, with the MSCI World Index falling 9 out of 13 times (69% of the time) in the month following each outbreak.

However, 3 months after the event, in 9/13 times the global Index returns to positive performance. This continues at the 6 months’ point – with the Index again continuing to be positive 9 out of 13 times.

The global economy has been in a recovery phase, with many positive indicators. Added to which, dire speculations about threats like the US/China ‘Trade War’ and Brexit has been massively over-hyped.

We will continue to monitor events and provide updates.