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The Global Financial Impact of Coronavirus

Every day that goes by, the world is hearing of new cases of the Covid-19 Coronavirus which is said to have originated from Wuhan, China. The global financial impact of coronavirus is being felt now: In recent days, global stock markets have shed gains and retreated into negative territory for the year.

Although we expect that the virus will cause more disruptions to global supply chains and travel, we believe that in the long run, most of the scare will be temporary. As of February 27, 2020, there have been 82,589 cases of the Covid-19 virus infection reported with 2,814 deaths. It is a rapidly spreading virus that is affecting more than 37 regions; however, most cases have primarily been in East Asia with some clusters showing up in parts of Europe and less than 100 cases being reported in North America. The vast majority of deaths are said to be contributed to older individuals or individuals with compromised immune systems.  

The coronavirus is most often compared to the 2003 SARS epidemic and the repercussions on the global economy and financial markets are still unfolding. According to MSCI, there are differences to consider in terms of China’s role in the global economy from 2003 to now: “China is a much bigger part of the global economy and markets than it was 17 years ago. China’s share of global trade rose to 11% in 2018 from 5% in 2003, based on World Bank statistics. Meanwhile, its share of the MSCI Emerging Markets Index has risen to 34.3% from 7.86% in 2003.”

Source : MSCI Economics Exposure Database, IMF World Economic Outlook, World Bank https://www.msci.com/www/blog-posts/the-coronavirus-epidemic/01718848208

What is the impact of coronavirus on global business?

From Starbucks to airlines and cruise ships, coronavirus is impacting business globally, with companies going so far as to lower their earnings guidance and canceling planned conferences. However, some industries are experiencing the opposite effect, especially in e-commerce and gaming. Capital Group’s Jody Jonsson explains: “As more people stay home, you’re seeing massive increases in the consumption of home entertainment and online shopping activities.” 

What should investors do in response to coronavirus?

Our viewpoint is that most investors should stay focused on the long-term even if it means that the short-term markets may get rattled. In the past, global markets have been able to move far beyond any single health event and we have no reason to believe that this one will be any different. Having a diversified portfolio means spreading investments among risk assets and low risk assets to prepare for unexpected events like this. For anyone that does not feel confident in their current investment circumstances, we encourage you to reach out to our Financial Advisors for a more in-depth look into your personal needs and resources.


The Team at Chatterton & Associates

Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Royal Alliance Associates, Inc., nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

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