Analyst Views – Markets roiled as China virus spreads

Uncertainty over a virus outbreak in China and its spread around the world is roiling markets, sending stocks lower and investors scurrying into safe-haven assets.

Investors are worried about the impact on both Chinese and global growth and cited a “sell now, ask questions later” approach.

COMMENTS:

DAVID KELLY, CHIEF GLOBAL STRATEGIST, JPMORGAN FUNDS, NEW YORK:

“We’re overdue for some sort of correction here as the market has been helped by some good news. We have a slow and steady economy, a giddy and fast market. Eventually those two things have to meet in the middle somewhere.

“People are nervous because the market has been going up for such a long time and done so well recently. I think this coronavirus may be more of an excuse than a rational estimate of its effects. At the moment I don’t think it’s going to change global GDP or global corporate earnings in a significant way.”

JASON PRIDE, CHIEF INVESTMENT OFFICER OF PRIVATE WEALTH FOR GLENMEDE TRUST CO, PHILADELPHIA:

“A main concern last year was of a China economic slowdown primarily due to trade relations. So now to have a completely new worry that impacts the exact same region, it hits at a key point for the markets.”

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NORTH CAROLINA

“Investors are selling first and asking questions later. The Chinese economy – and possibly the world economy – will take a hit in the short run and lower prices are a rational response to the increasing spread of the coronavirus.”

“However, over the medium term this will likely prove to be a buying opportunity – just not at the very beginning of the outbreak. To use SARS as an example, during the 5-month period starting in mid-November 2002 until mid-March 2003, the S&P 500 dropped 12% before bottoming and then finishing that year 19% higher than where it started.”

JOHN BRIGGS, HEAD OF STRATEGY, AMERICAS, NATWEST MARKETS

“Markets are clearly fearing the expansion of the disease is a signal that measures so far are failing to contain its spread. It’s risk off across the board, and in US rates, the curve is no longer purely direction as the front end gets involved, with the market now pricing in approximately 50% chance of a June cut and more than a full cut through December.”

EDWARD MOYA SENIOR MARKET ANALYST, OANDA, NEW YORK

“US stocks were ripe for a selloff as valuations were getting out of hand, but now fear that the coronavirus will have a tremendous negative impact on Chinese growth will derail outlooks for many multinationals.

“A lot of Wall Street was heading towards the sidelines before the virus and we could see longer-term investors wait to jump back in if we see a 10% pullback.”

ROBERT PAVLIK, CHIEF INVESTMENT STRATEGIST, SENIOR PORTFOLIO MANAGER, SLATESTONE WEALTH LLC, NEW YORK

“It’s an over-reaction. The market has been waiting for some sort of sell off to develop after a roughly 30% year and for a reason for it to happen.

“I think it’s going to last a few weeks until the Chinese have gotten this under control. But this is short term. I don’t believe many of the missed sales occurring in China because of the lock downs in cities are sales that are going to go completely away.”

GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA

“Part of the trade… today is driven by positioning in the equity markets, which had gotten a little bit out of hand with a lot of aggressive call buying etc. That creates a lot of kindling for a fire in risk asset prices. We’re seeing that burn through today, and Friday. Thus far there seems to be more buy the dip than sell it, but it’s two days into a news event and positioning hasn’t changed materially. There is still certainly a great deal of downside risk.”

JUAN PEREZ, SENIOR FOREIGN EXCHANGE TRADER AND STRATEGIST, TEMPUS, INC, WASHINGTON D.C.

“The dollar usually does strengthen as a result of anything that seems like it has the potential for physical chaos, for a physical crisis.

“We do think the dollar this week, if nothing improves, will continue on this strong run. But of course, anything at any moment can change if the headlines do turn, or if perhaps this is somehow curable then expect markets to turn around and the dollar to lose from that safe-haven risk-off momentum.”

KATIE NIXON, CHIEF INVESTMENT OFFICER, NORTHERN TRUST WEALTH MANAGEMENT, CHICAGO

“Looking back at the SARS crisis in 2003, we see that the hit to economic growth was measurable albeit short lived. Past may not be precedent, however, as the Chinese economy today is more dependent on consumer spending, and the ability of this virus to spread is greater given China’s modern transportation infrastructure.”

ALEC YOUNG, MANAGING DIRECTOR OF GLOBAL MARKETS RESEARCH, FTSE RUSSELL, NEW YORK

“Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy. China is the biggest driver of global growth so this couldn’t have started in a worse place. Travel in China is much more ubiquitous than it was during the SARS outbreak in 2003, making comparisons less useful. And with the markets overbought to begin with, this is now a sell first, ask questions later situation.”

ANDREW BRENNER, HEAD OF INTERNATIONAL FIXED INCOME AT NATALLIANCE SECURITIES:

“The coronavirus has the risk markets in global panic… 10 years hit 1.60, a level where many calls have been sold, so the “whoosh” moment for 10 years… has arrived.”

Reuters

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