 | AUTHOR: Jason J. Roque, CFP®, APMA® TITLE: Investment Adviser Rep – CCO TAGS: Coronavirus |
Markets did not seem to be interested in economic data last week. Instead, the focus was on the Coronavirus and the uncertainties that come with it.
What Is Known
The Coronavirus has an incubation period of 10-14 days, during which the carrier is potentially contagious. Over 80 have died and over 2,400 are infected, with the numbers growing rapidly. In an effort to contain the virus China has restricted travel for key cities where infection levels are highest. China is currently celebrating the lunar new year, a period of elevated travel in the country. Several nations globally are beginning to confirm cases of the virus.
What Is Unknown
The extent of the outbreak is still unknown. The duration and depth of infection are unknown. The incubation/contagious period make it hard to contain and measure. It is still uncertain how effective China’s stopping of travel in an effort to contain the virus will be.
Market Impact
China is coming off the heals of a trade dispute with the US. In the process they expended capital to keep their economy stable. With this closely following, China will likely see a drop in GDP during the first quarter. As lunar new year spending will be down, travel will be down, and consumer confidence will likely take a hit. China contributes a healthy percentage to global GDP growth, so weakness there, will likely impact commodity prices as well. While these factors may drive market activity in the short run, things should return to normal once there is containment. This is how SARS in 2003 turned out.
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