Market Reaction to the threat of Coronavirus (COVID-19) on the Global Market

Pressure on Global equity markets has increased over the last few days, with news of the coronavirus, COVID-19, spreading at a near pandemic rate raising concerns among investors.

In this blog, we will look at the impact previous pandemics have had on the global investment markets and evaluate some of the potential consequences that we can expect as a result of COVID-19.

Previous Pandemics

The below graph, sourced from American investment firm Charles Schwab, displays previous pandemics against worldwide equity market revenues. The data implies that past epidemics have not had any remarkable or long-term impact on stock prices. While some economies have suffered for short periods, the majority of the pandemic risk has proven to be nothing more than potential.

What is different in this particular scenario is news coverage and preventative responses from global governments, with the most significant global impact being on travel. The Six Nations rugby match between Italy and Ireland has been postponed. Questions have also been asked if the Olympics, scheduled to take place in Tokyo, will go ahead in August.

After overnight market deteriorations in both the US and the Far East, we can expect a turbulent week ahead. Indeed, as you may have seen in the news in recent days, stock markets have seen their most significant single-week declines since the financial crisis of 2008/ 2009.

This instability will take some time to pass, and further market falls should be expected. However, there is a broadly shared expectancy amongst market strategists and economists, that short-term market impacts, such as Coronavirus, do not lead to long-term economic decline.

Current Outlook

Yes, COVID-19 is contagious, and it is a worrying time. However, most “flu-like” viruses do tend to be seasonal, dissipating as the warmer months approach.

Notwithstanding a widening of the infected zone, the rate of infection has slowed, and it is the view of the World Health Organisation (WHO), that COVID-19 will continue to follow this path.

While our current news threads have been overwhelmed by newly reported cases in other countries, we should take some comfort from the fact that China is already rebounding back, with the economy and its workforce getting back to work and infection rates declining significantly.

The global economy entered 2020 with opportunities for growth and, here at Brooks Wealth, we fully expect this to remain the case, even if COVID-19 causes something of a delay.

If you have any questions or concerns, please get in touch with us at Brooks Wealth Management on 01733 314553 or via our Contact Us page.