Much Ado About Corona?

February 13, 2020 | Nicole Johnson-Barnes, CFA, Research Analyst

By now, you have all read the headlines and watched various news commentators detail the perils of the latest pneumonia outbreak, 2019 Novel Coronavirus (“nCov”), impacting China, nearby countries, and a few of their western trade partners. As of February 13th, confirmed cases in mainland China had reached over 60,000 patients, and as was broadcast on February 11th, the death total has surpassed 1,000. Even though these health figures are alarming, we have experienced similar outbreaks in the past and can take some comfort in knowing that eventual containment — and a vaccine — are in the works.

From a financial market’s standpoint, one common theme we are hearing from economists and portfolio managers is that, similar to the SARS outbreak of 2002–2003, the recent sharp, nCoV-driven market sell-off is temporary and the overall market impact will be minimal over the long-term. This chart of the week shows the short-term returns of the broader market — using the MSCI All Country World Index as the guidepost — during the SARS outbreak, as well as the current coronavirus. As shown in the chart, during the first three months of the SARS outbreak the MSCI ACWI posted a -2.9% return. However, six months after the initial SARS patient, the MSCI ACWI return was back in positive territory, up 2.8%.

While comparing SARS and nCoV makes sense from a regional and virus strain commonality, one must also consider the economic circumstances surrounding each outbreak. The supply chain connectivity between China and the broader world has advanced in leaps and bounds since 2003. The potential knock-on effects of an extended drop in Chinese factory productivity could slow, for instance, the technology supply chains for Apple, LG, Google, and more. Hence, economists are probably spot on that the market will rebound, but the details of the true impact on global growth are yet to be defined.

Print PDF > Much Ado About Corona?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Nicole Johnson-Barnes, CFA
Research Analyst

Get to Know Nicole

Related Content

02.21.2020

Coronavirus and the U.S. Economy: Assessing the Impact

Over the last month, the world has been gripped by fears of the coronavirus and its eventual toll on the…

02.06.2020

Is Manufacturing on the Rebound?

The ISM PMI index is a survey of manufacturers and measures the overall strength of the manufacturing sector. A measure…

01.30.2020

Another Way to Look at Spreads

Bond spreads¹ now appear tight based on the traditional method of calculating spreads² as positive momentum…

01.28.2020

Will the Spread of Coronavirus Drive a Risk-Off Market?

Global markets have come under pressure as the number of coronavirus cases grows. Through January 27th, the S&P 500 is…

01.23.2020

2020 Market Preview

2019 was certainly a profitable year for investors as traditional and alternative asset classes delivered positive returns.  As we enter…

01.13.2020

2020 Market Preview Video

This video coincides with our annual Market Preview newsletters and includes a recap of 2019’s performance and…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >