Global equity markets began the week with a significant selloff as the number of coronavirus (also known as COVID-19) cases and deaths attributed to this outbreak grew dramatically outside of China over the weekend. We have been cautious towards equity markets for some time now as valuations have been stretched without a marked improvement in fundamentals.
There will be supply-side disruptions out of China with many Chinese workers quarantined at home and unable to work. American companies and other global companies depend on parts and goods manufactured in China. In addition, there are global companies that do business in China. Economic activity in China is already slowing as people are not spending as much money and not leaving their homes. Industries like cruise lines, airlines, hotels, and others will be affected as people are putting their travel plans on hold. The thesis that the global economic impact will be short-lived is fading on news of the virus spreading to Italy, South Korea, Japan, Iraq, and Iran.
- Global stock markets price in risks of coronavirus spreading
- Economic data had been improving, but equity valuations were high
- Continue to expect rising volatility to increase as uncertainties grow
Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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