‘The most disruptive thing to hit markets in many years’: 5 financial experts sound off on coronavirus chaos, and what it means for investors

Image
  • Stock markets around the world slumped on Monday as new coronavirus deaths in Iran, Italy, and South Korea marked a new high for outbreak-related fears.
  • Economists have repeatedly downgraded their projections for global growth as the virus stifles demand, while public firms lowered forward-looking guidance due to supply chain disruptions and closed retail locations.
  • Here’s what five financial industry experts had to say about the intensifying outbreak, and how investors can best position themselves in the near future.
  • Visit the Business Insider homepage for more stories.

Stocks tumbled around the world on Monday amid renewed investor fears that the coronavirus outbreak will reach. In the US, the Dow Jones industrial average plummeted nearly 1,000 points in early trading.

New deaths in Iran, Italy, and South Korea drove the outbreak’s escalation in recent days. China hosts the vast majority of coronavirus-related deaths, but the latest fatalities fuel concerns that the virus will evade containment and continue spreading for weeks to come.

Coronavirus has caused 2,626 deaths and has infected more than 79,000 people as of Monday morning. The virus has spread to at least 29 countries since originating in Wuhan, China.

Economists have repeatedly lowered their estimates for global growth in the wake of the outbreak. China faces the biggest fallout as a rapid halt in demand and factory activity cuts into its already slowing gross domestic product growth.

Read more: A renowned market bear says investors should be ‘braced for zero or negative total returns’ over the next 10-12 years – and reiterates his call for a 67% stock meltdown

Some analysts expect economies to post a healthy bounce-back once the disease is contained, but others anticipate markets will post a major correction as the virus racks global industries.

Here’s what five financial industry experts said about the heightened market risk and how investors should position themselves in the coming months.


eToro: ‘Could be the most disruptive thing to hit markets in many years’

Image

First reports of the coronavirus outbreak dragged on US stocks through late January, yet markets resumed their surge to record highs in the following weeks as investors shrugged off the heightened risk.

The latest virus developments should curb investors from continuing their unconcerned behaviour, Adam Vettese, an analyst at investment platform eToro, said.

“Investors are now waking up to the fact that the coronavirus could become a global pandemic. The ‘out of sight out of mind’ approach is now clearly no longer an option,” he wrote in a note on Monday morning.

Despite recent months seeing market risk from global trade tensions, fears of US-Iran conflict, and recession warning signs, coronavirus “could be the most disruptive thing to hit markets in many years” if governments can’t quickly contain the outbreak, the analyst added.


Evercore ISI: ‘Confident the backdrop will be chaotic near term’

Image

Uncertainty around when the virus will be contained has many investors running to safe-haven assets like gold and bonds. The growing market risk marks a buying opportunity for those looking to enter stocks at lower prices, Dennis DeBusschere, head of portfolio strategy at Evercore ISI, said, recommending specific stocks instead of sector-focused assets.

“If recession risk is still relatively low and every government in the world is attempting to offset [coronavirus] with easier policy, use the weakness in stocks as a chance to add to high quality individual companies,” the strategist wrote.

The research firm maintains the coronavirus presents a short bout of heightened volatility instead of an end to the markets’ prolonged bull run. The near-term swings in asset prices will push investment cash out of both growth and momentum stocks, Evercore said. Focusing on firms with strong fundamentals should pay off in the long run, DeBusschere added.

“We have no idea how the new global phase of Covid-19 will play out, but are confident the backdrop will be chaotic near term,” he wrote.


Capital Economics: ‘A process of de-globalization lies ahead’

Image

The coronavirus joins a spate of other factors driving a decoupling of Western economies from China, Vicky Redwood, senior economic advisor at Capital Economics, said Monday.

Trade tensions between the US and China remain as the nations mull a phase-two trade deal. Differences in the two superpowers’ political systems also threaten to push them apart after years of increased globalization, Redwood wrote.

“Coronavirus on its own won’t suddenly precipitate a big decoupling between China and the West, but the virus adds to a list of other reasons why a process of de-globalisation lies ahead,” she added.

De-globalization may first show up in public companies, according to Capital Economics. The outbreak has already led firms including Apple and Tesla to warn of a hit to production efforts in China. Though the outbreak won’t curb globalization immediately, it highlights “the vulnerability of long and complex global supply chains” and could drive a shift in logistics, Redwood said.


deVere Group: ‘Investors’ complacency leaves many wide open to nasty surprises’

Image

With coronavirus’ death toll growing rapidly outside China, all eyes are on the world’s central banks for any sign of economic stimulus to offset the outbreak’s affect on supply chains and weakening demand.

Global stocks stand to sink as much as 10% if governments fail to add liquidity to markets, Nigel Green, founder and CEO of financial consultancy deVere Group, said.

Investors may find some protection in multi-asset strategies, Green added, as a boosted diversification of risk could stave off losses seen across global equities. Even if stocks recover from Monday’s drop, underestimating coronavirus’ fallout can come back to bite those keeping their cash in stocks, according to deVere.

“Many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread – and a faster pace,” Green said. “This will inevitably hit financial markets and investors’ complacency leaves many wide open to nasty surprises.”


Independent Advisor Alliance: ‘Fear is going to be with us for weeks, if not months’

Image

Coronavirus is posed to roil financial markets through the near future, yet the “trillion dollar question” is whether its hit to global economic growth will push the US into a recession, Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, wrote.

Anything short of such an event would establish the outbreak as a prime buying opportunity, he added.

Though the economic impact from coronavirus isn’t to be underestimated, stock markets will emerge triumphant and continue their upward tear later in 2020, according to IAA.

“Unfortunately, FDR had it right when he said the ‘Only thing we have to fear is fear itself’ and so the stock market is going to move lower in the short run before bottoming and going back to all-time highs again,” Zaccarelli wrote.


Now read more markets coverage from Markets Insider and Business Insider:



Warren Buffett warns coronavirus could disrupt Berkshire Hathaway’s annual meeting, and calls Bill Gates his ‘science adviser’



US business activity falls for the first time since 2013 amid the coronavirus outbreak



Tech startups have a new ‘exit’ strategy. Why private equity firms have started ploughing billions into acquiring startups.