The Impact of Coronavirus:
What we know and what we do not know
ecently, financial markets across the globe have experienced increased volatility in response to concerns of a potential slowdown in economic activity due to the continued spread of COVID-19, “coronavirus,” across part of Asia and more recently Europe.
What we know:
Over the past month, the spread of the virus has resulted in quarantines of several cities in China and more recently to a significant increase in the number of cases elsewhere, notably South Korea, Italy, Japan and Iran. These developments have led to sharp declines in domestic and certain foreign fixed-income yields and high volatility in global financial markets. Equity markets have also witnessed increased volatility.
To put current market volatility in context, the below table highlights market responses to virus outbreaks in the past:
What we don’t know:
It is difficult to quantify the potential economic impacts of coronavirus as it will largely depend on the length and severity of the outbreak, but it is possible that in the short run certain supply chains connected to Asia may be adversely impacted.
While the spread of the virus in China seems to have slowed, it has increased in other parts of the world, and it is unclear where it will go next. Of course, the United States is taking precautionary steps in anticipation of what may or may not occur domestically. And with that being said, the ultimate outcome of this situation is still yet to be determined.
Like many other historical events and virus outbreaks in the past, it is often the unknown aspects of an event that cause major volatility and concern. As long-term investors, we believe it is important to keep a level focus on investor specific goals. And as your trusted financial advisory team, we are monitoring market conditions closely as well as the outbreak itself.
If you have not done so already, we encourage you to visit our website and watch our most recent video on “History and Investor Behavior.” And of course, if you have any questions specific to your situation, do not hesitate to call.