Impact Of The Corona Virus

Date: February 13th, 2020

YOU NEED TO READ THIS – Corona Virus – No….. you don’t get this from drinking beer and the after effects are quite different.

Jokes most definitely aside, this is not only a serious issue health wise but also for the global economy. The virus has now been reported in more than 28 countries and has sent shockwaves through financial markets worldwide.

The full impact of this will not be realised until later this year as the dominoes continue to knock on through a multitude of affected sectors. Investors should note that over the past two decades, health threats from viral outbreaks have triggered short term stock market corrections in the range of between 5 – 15% (Lonsec, 20200206).

Research indicates that sectors likely to be most affected are Resources (energy, iron ore and copper), Tourism/Travel and Consumer Discretionary. Forecast earnings downgrades for ASX companies within these sectors are likely as early as this month (Feb).

Possibly the most disturbing thing however, are reports coming out of China’s Hubei province where the virus is said to have originated, that the death toll has now doubled from the number reported only yesterday. They further confirmed a staggering 14,840 NEW cases on February 12 (Reuters 20200213). Granted this has come on the back of an apparently new methodology that doctors have adopted in counting cases but does not explain the sharp increase in deaths overnight. The impact of this news on markets was immediate with the US S&P500 dropping 0.68% to 3,362 around 10am this morning (AEST).

Will this be a singular trigger for a larger correction here (I’m thinking perhaps 7% to 6,600) or will it be the virus together with the economic impact of the fires and now flooding that finally tip the scales is anyone’s guess but companies are overvalued right now and markets I suspect, about to become a little skittish.

As always, if this information causes any concern for yourself or anyone you know, please don’t hesitate to call. Now might be a good time to reassess your short term strategy.