Nonetheless, the World Health Organization (WHO) reports that contagion in China has been slowing for some weeks. The economic disruption may not last for long

Just over a month ago an unusually positive consensus was making us wonder if stocks were running out of tactical headroom. Little did we know: the spread of the coronavirus outside Asia saw US stocks in February register their fastest post-war correction (defined as a 10% fall from their peak). Markets have fallen sharply further in March to date.

The tentative revival in global growth, the US election and indeed most other issues have been set aside as that positive consensus has evaporated. We are once again facing a wall of worry, and as natural contrarians - and keen students of the ways in which media and markets interact - we find ourselves back on more familiar ground.

The humanitarian cost of the outbreak can hardly be exaggerated, sadly. But is the economic and financial mood an overreaction?

We cannot know exactly when global contagion will slow, or estimates of fatality rates converge. The disruption to business seems likely to be significant: having receded from view at the end of 2019, the prospect of recession has moved closer again.

Nor do we take much reassurance from the panicky response of central banks, which in this context seems as illogical as it is likely to be ineffectual.

Nonetheless, the World Health Organization (WHO) reports that contagion in China has been slowing for some weeks. The economic disruption may not last for long - but if it does, we suspect that a recession on this account might be less threatening than usual, not more. And from their admittedly lofty starting point, the falls in stock markets look bigger to us than the likely value of lost business.

Faced with this alarming bolt from the blue, our advice to patient investors is to sit tight and wait for more clarity - but to be looking for opportunities to add to long-term positions, not cut them.
We work across the world

From London to San Francisco, to our home base in (Saint Helier) Jersey, we’re looking for extraordinary and creative scientists to help us drive the field forward.

AC Investment Inc. currently does not act as an equities executing broker or route orders containing equities securities. If AC Invest’s business model were to change and it begins routing non-directed orders in NMS securities, it will comply with the disclosure requirement of Rule 606.

77 Massachusetts Avenue Cambridge, MA 02139 617-253-1000 pr@ademcetinkaya.com