February 2020 | Marco Fragnito, Managing Principal | Robert R. Fragnito, Chief Operating Officer
In light of recent volatility related to the outbreak of the coronavirus, we at MCF Capital Management wanted to share our views and considerations as these developments continue to effect markets.
How Epidemics Effect Markets
Epidemics like the coronavirus generally have short-term effects on markets. Many analysts are drawing comparisons to the SARS outbreak of 2003 as a benchmark for gauging the future course of markets in the near-term. As the chart below illustrates, the MSCI World Index witnessed an increase following the outbreak of the disease. SARS rendered a 10% market decline over a period of three months, but led to a 20.76% increase over a 12-month period following April 2003. In our view, the recent declines we’ve witnessed in equity markets coincide with this trend.
Immune: world epidemics and global stock market performance
Note: MSCI World Index scale is reflected in the left vertical axis. Source: Charles Schwab, Factset data as of 1/21/2020. Past performance is no guarantee of future results.
What’s Different this Time
What analysts and markets are differentiating is that at the time of the SARS outbreak, China accounted for 8.7% of the global economy whereas in 2019, its economy accounts for 19.3%. As a result of this greater share, attempts by governments to slow the spread of the virus through travel restrictions, quarantines and facility shutdowns may impact growth on an increased scale.
What We’re Thinking
We recently published our latest monthly market commentary and addressed the coronavirus in addition to our outlook for 2020. Our view for the trajectory of 2020 with the coronavirus in the foreground and the US Presidential Elections on the horizon, maintains an overall positive outlook for equity markets and a less favorable outlook for fixed income. We suggest clients and readers speak to us if they have any concerns as these developments continue to unfold.
If you have any questions please contact us directly at 949.472.4579, and feel free to forward this report and our contact information to anyone who might be interested.
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The opinions expressed here reflect the judgement of the author(s) as of this date and are subject to change without notice. Information presented here is for informational purposes only and does not intend to make an offer, solicitation, or recommendation for the sale or purchase of any product, security, or investment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here. The information being provided is strictly as a courtesy.