The coronavirus has been a concern of the equity markets for some time. The recent decline in the number of new cases in China seemed to signal a slowdown in the spread of the disease.
At the start of the week, however, the outbreak of new cases in a several countries including South Korea and Italy raised fears of a possible pandemic, or at least an overall slowdown of global economies.
Stock market reaction
The markets have experienced several declines since Monday, with a drop of 10% on Thursday. These setbacks could be followed by a recovery, as we already saw at the end of 2018.
Faced with this situation, central banks and governments will no doubt take steps to support and stimulate the economy. Infrastructure projects could even be put forward by governments, which would be positive for cyclical stocks (materials, energy, industrial products).
Obviously, the travel industry may be shaken and take some time to recover from this situation. All levels of the supply chains are under increasing stress. We can expect corporate earnings to come under pressure during the next quarter.
Stay the course!
As an investor, how should you react to this market turbulence? By sticking to your investment policy and staying invested. In the short term, market events can cause you to question your investments. However, think about the volatility of December 2018 and the recovery that followed. Our managers are proactive: they remain on the lookout for any developments and will react quickly to protect the portfolios.
For any questions, contact your advisor, who will be pleased to speak with you.