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My Weekend Reading -- Market's Continue Unabated Volatility

My Weekend Reading -- Market's Continue Unabated Volatility

March 09, 2020

Week 2 of up-and-down market volatility is came to an end with flat movement across the major US indices. Though the impact on human life is at the forefront of everyone’s concerns, there are many uncertainties surrounding the potential impact of the virus to the global economy. The global economy was already fragile from the nearly two-year-long U.S.-China trade war and the spreading virus will likely impact economic growth. While more equity market weakness is possible as the virus continues to grow globally, the downside could be limited as governments and global central banks have possible tools to combat the potential death toll and economic impact.

A recent commentary from Leggier Mason provide an array of quotes from professionals around the industry.  I found these interesting:

  • “The coronavirus as an exogenous event will likely extend the length of the overall cautionary yellow signal for the ClearBridge Recession Risk Dashboard, and a “V” shaped economic rebound from [its] effects appears increasingly unlikely...we believe caution is prudent at the current juncture given the potential for a continued period of heightened volatility.”
    --Jeffrey Schulze, Investment Strategist, ClearBridge Investments

  • "Headline risk suggests the virus may be on the verge of being declared a pandemic, though our base case is that [this] should ultimately play out like a bad flu season. The range of probabilistic outcomes will depend on available data, which is particularly challenging since stakeholders do not have complete information regarding the extensive impact of the virus, particularly in China."
    --Tracy Chen, CFA, Portfolio Manager

  • "Because of disruptions in businesses and operations, global GDP growth will likely take a hit...before rebounding in the second half of 2020 and next year. Unlike stocks or bonds, private real estate tends to be much less volatile. Unless the outbreak lasts for an extended period or severely impacts business operations and consumer daily life generally, we believe that the overall impact on U.S. private real estate should be minimal."
    --Clarion Partners Investment Research

  • "We suspect the market will follow a similar pattern [to the 2003 SARS outbreak] and will recover rapidly when there is evidence that the number of new cases has peaked...If the market does move to fresh lows, we expect it will only hold those levels briefly and rebound sharply on the first indications that the number of new cases of infection has peaked."
    --Andrew Graham, Head of Asia, Martin Currie

  • "The speed and decisiveness of the Fed's [surprise rate hike] reflect both the economic seriousness of the COVID-19 the Fed understands, the risks are elevated when growth, inflation and interest rates are all at low levels. In such an environment, we believe monetary policy should be proactive and aggressive to support growth and avoid levels moving even lower."
    --John Bellows, Portfolio Manager/Research Analyst, Western Asset Management