We have been experiencing almost unprecedented volatility in the world’s stock markets. The last week of February saw a 10+% market decline and March 2 saw the largest one day market gain (in terms of Dow points) in all of stock market history. The questions are: What does it all mean? And where do we go from here?
Covid-19 represents uncertainty which is precisely what the stock market hates. This virus seems to be a new derivation of existing flu type viruses. But until more is known, the market will be affected by each new revelation and reported new cases. However if the actual number of cases and fatalities do not dramatically increase, then the effects will start to fade.
Going forward, the market has already experienced a normal 10% correction, which was probably overdue, and Covid-19 provided the trigger. However, as long as so much about the virus is unknown there will continue to be some pressure on the market. The volatility seems to be caused more by the hype rather than the actual disease itself. The linked article is the best we have found that puts this virus and its impact in its proper perspective: https://www.ftportfolios.com/Blogs/EconBlog/2020/2/25/time-to-fear-the-coronavirus.
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