Can Equity Markets Recover from the Coronavirus?

As the coronavirus spreads, stock markets globally have declined on falling earnings expectations. But as Director of Research Carmel Wellso explains, these types of market shocks tend to be short term in nature and can lead to a strong rebound.

Key Takeaways

  • After weeks of strong performance, markets have started to factor in potentially lower earnings for the first half of 2020 due to the spreading coronavirus.
  • Historically, such outbreaks have resulted in three economic stages: demand weakness, supply-chain disruption and permanent behavioral change. Currently, we believe we are in the second stage.
  • During the SARS outbreak in 2003, stocks rebounded strongly following the market’s sell-off. As active managers, we can analyze companies to try to determine where the impact could be most severe and which companies might recover quickly.