As the week comes to an end, I wanted to continue to put out communication focusing on the coronavirus outbreak impact on investment markets. I continue to get (at least) daily updates from our research & management partners. Earlier in the week I synthesized some of these reports in our quarterly market commentary. Given the further decline I wanted to offer some of the reports I am receiving Friday morning as further reading should anyone have interest. Though I receive countless reports, I am posting those from our sub-advisors who are represented in many of our client portfolios.
Mid-Quarter Market Commentary -- Coronavirus Creates Market Uncertainty
This is a post of our commentary from earlier in the week--in case you missed it or would like to share it with a family member or friend. Of particular note is the chart offered from First Trust showing longer-term investment market reactions to other outbreaks.
BlackRock Investment Institute Commentary -- Coronavirus Warrants Caution
The "key takeaways" from the BlackRock piece that show impact on thinking around investments are as follows:
- Reduction of any overweight equity and credit exposures due to coronavirus outbreaks but
maintain benchmark holdings. - Base case is that the global expansion is intact, but the risk is a premature end to the cycle.
- Emphasis on resilience through exposures to quality equities, government bonds and cash.
- BlackRock's base case assumption: This is a temporary shock, albeit one of unknown depth and duration. But the risk is that the disruptions create liquidity crunches that, if not addressed, could trigger a premature end to the economic cycle.
Capital Ideas by Capital Group -- Coronavirus rattles markets: What's next for global growth?
Capital Ideas
The team at Capital Group (who manages American Funds portfolios) looks at supply chain interruptions in China and the global impact on trying to contain the disease:
- China likely to see flat to negative growth with disruption from coronavirus. -- Given China’s stature as the world’s No. 2 economy, one of the most difficult questions that markets are grappling with is the possible impact on global supply chains, and the corresponding effect on multinationals and economic activity in other countries.
- The global economy will likely suffer from China’s impact. -- This poses a potential threat to Europe’s fragile industrial recovery, with Germany the most exposed through trade links. Meanwhile, France and Italy also have significant exposure to China through tourism, services and luxury goods. And Japan, on the brink of another recession, is heavily dependent on China for intermediate goods that go into its manufacturing.
- Investors should brace for continued market volatility -- While the U.S. economy began 2020 in a much stronger position relative to the rest of the world — with very low unemployment, a robust housing market and a confident consumer — it is not immune to China’s slowdown and supply chain problems.