The market is bouncing all over the place, down big on Friday. It is because no one is quite sure what to make of the Coronavirus outbreak (and earnings have been coming in strong)? Is the Coronavirus going to be a major disruptor to the World or not? It is difficult to say now and every fresh piece of evidence will swing the market. The risks are certainly enormous and will keep everyone on edge.
Within China it appears to be upending many lives with economic consequences. As China continues to rise as a world economic power we would expect market volatility, attributed to China, to rise in concert. An infectious disease is a good example, but geopolitical risks, government opacity, and economic volatility are all potential firestorms as a relatively underdeveloped, relatively closed, single party ruled country increasing pulls the economic yoke.
We are watching the situation closely and have been studying historical parallels, but much is unknown at this point. As mentioned in our last weekly update, previous short term pandemics have not caused the markets to go awry. Longer term pandemics - we only have the 1918 flu – there were definitely ups and downs. We’re not sure a comparison to 1918 is even fair, as communication speed, access to therapeutics and potential cures, and trading volume / types of traders etc were all so different.