This is because – as research by JP Morgan shows – previous outbreaks of diseases prior to coronavirus have seen markets slump before making huge recoveries. The international investment bank’s study looked at past disease crises, including SARS (November 2002 to July 2003), swine flu (March 2009 to August 2010), Ebola (December 2013 to June 2016) and the Zika virus (March 2015 to November 2016). In every case study, markets were able to rise back to normal levels after the initial slump caused by travel restrictions and other limiting factors for businesses around the world.
In fact, the bigger the initial slide the the bigger the post-crisis boost.
Mislav Matejka, head of global and European equity strategy at JPMorgan in London said: “The more equities fell initially, the more they subsequently rebounded.
“These episodes did not lead to a prolonged period of selling and were a buying opportunity within weeks.”
The MSCI China index fell 8.6 percent on the SARS outbreak but rebounded by more than 30 percent in the three months after April 2003.
Stocks in Hong Kong fell by a fifth, but also sprang back and made significant gains. Similarly, swine flu triggered a 4 percent drop in the MSCI Mexico index, which then gained more than 25 per cent.
Kristina Hooper, Chief Global Market Strategist at Invesco says many things are difficult to predict during the coronavirus pandemic.
She said this month: “It’s important that we don’t panic but really look to history as a guide. At the moment, so little is known that it’s difficult to even pull in experts.”
The optimistic viewpoint was shared by Stefan Iris, chief investment officer at Camden National in his analysis earlier this month.
He said: “Whether [COVID-19] is more severe than other outbreaks or not, these things ultimately pass.
“But we’re in for a choppy road for days, weeks or months.”
Mr Iris said that investors should not cash out on their stock market position, and instead look to the long term for success.
He added: “They should look at the long term, whether anything will be different with the company they’ve invested in five to 10 years.”
Coronavirus travel: Future of travel industry uncertain after pandemic [INSIGHT]
Coronavirus treatment: Doctor reveals three things that helped her [ANALYSIS]
Coronavirus: Universal Basic Income ‘one of options’ to help workers [INSIGHT]
Camden National Wealth Management’s analysis showed that US stock market index S&P rose nearly 10 percent on average in the aftermath of outbreaks in the last 40 years, including SARS, avian flu, swine flu, ebola and zika viruses.
Currently, it is down more than 10 percent since the World Health Organisation called coronavirus a crisis on January 30.
In the UK, Prime Minister Boris Johnson announced drastic economic measures to try and protect business during the coronavirus crisis.
This includes £330billion of business loans.
Chancellor Rishi Sunak said yesterday: “We must act like any wartime government and do whatever it takes to support our economy. That’s the main purpose of this press conference this afternoon.”
He added: “Yes this enemy can be deadly, but it is also beatable – and we know how to beat it and we know that if as a country we follow the scientific advice that is now being given we know that we will beat it.”
Source: Read Full Article