In mid-February, we asked Candace Bangsund, Vice President and Portfolio Manager at Fiera Capital, to share her thoughts about the coronavirus epidemic and its likely affect on markets in the foreseeable future.
Many signals in North American and International economies were indicating a solid market outlook for 2020. However, investor sentiment has taken a turn for the worse after the outbreak of the Wuhan coronavirus, which has spread rapidly in China, and progressively in other parts of the world.
The challenge is that the Chinese economy is integrated into the global economy in so many ways. Many businesses source components from Chinese companies; much of the world’s raw materials travel to China before being turned into manufactured products; thousands of foreign businesses have opened their own factories on the mainland; and hundreds of millions of Chinese consumers buy products manufactured at home and around the world.
Fortunately, Chinese policymakers are working to stem the damage to both financial markets and the economy – though uncertainty is likely to prevail in the near-term until the virus has been contained.
Canada’s S&P/TSX has managed to remain buoyant so far, but the U.S., international developed markets, and emerging markets have all experienced volatility. This has led some investors to seek a refuge in bonds—especially U.S. treasuries—which has driven down yields.
Nobody can predict the length and gravity of the coronavirus epidemic, so economic predictions are difficult at this time. What we do know is there have been positive developments recently that should help keep markets relatively stable through the crisis. The revised NAFTA deal (now called USMCA) will help reduce uncertainty, and “phase one” of a U.S./China trade deal has reduced tensions between the two economic superpowers. Consumer confidence in the U.S. remains high thanks to impressive job creation, rising incomes, and low interest rates that have bolstered spending.
That being said, the economic effects of the outbreak in China will spillover across the globe as firms brace for supply-chain disruptions and a blow to consumer demand from the spread of the coronavirus. If it follows the path of previous epidemics, however, weakness should largely prove transitory and may result in less volatility as the year progresses.
If you’re concerned about potential volatility and how it may affect your portfolio, we encourage you to contact CDSPI Advisory Services to speak to an Investment Planning Advisor.*
*Investment advisory services are provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply to advisory services in certain jurisdictions.
The information contained in this article is of a general nature only and should not be considered as personal investment or financial advice. All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions.