Coronavirus: Its Impact on the Markets

On February 11, 2020 the World Health Organization announced the Coronavirus or COVID-19 as a disease that causes respiratory symptoms. The coronavirus outbreak was first identified in Wuhan China.

Concerns about its spread have put the world on alert. Recently, Japan, South Korea, Singapore, Italy and Iran have reported spikes in new cases, escalating the fear that we need to prepare for a humanitarian crisis.

As impacted countries contain the virus, its economic effects have begun to reverberate. This week, investors witnessed dramatic single-day point drops in the U.S. Markets – with the Dow off 3.3% from its recent all-time high, recorded on February 19. However, as of February 26, it appears that the U.S. market is finding support as international health authorities strive to control the spread of the virus.

According to John Stoltzfus, Oppenheimer Asset Management, Chief Investment Strategist, “Keeping things in context should provide some comfort from an investment perspective.” He adds, “The connection between the epidemic and the global economy is notable; according to Reuters, the coronavirus will take roughly 0.1 percentage point from global economic growth.

However, aided by 21st century technology, biotechnology, modern pharma solutions, diagnostics and considerable experience as a professional community in dealing with global virus risk over the past 20 years (since the SARS outbreak), our expectations are that global health authorities will navigate this latest set of challenges effectively if not as soon as Main Street and the markets would like.

Generally, investors should avoid making precipitous moves with their portfolios and talk with their financial advisor for specific guidance. Investors should also discuss developing plans, with their advisor, to diversify their portfolios as the extent of the virus becomes clearer in the months to come. During times of volatility diversification is one of the most important portfolio tools an investor can have.

As we read in the news about the loss of life and suffering caused by this virus, we all hope the people and areas affected recover quickly. With history as our guide, we are optimistic that recovery is on the horizon.

You can read all of the firm’s commentary related to the coronavirus by logging into your Oppenheimer account and clicking on the research tab.

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