The Coronavirus Pandemic—The End of the Rally or a Buying Opportunity?

QMA offers its assessment of the impact of the coronavirus on global markets.

February 11, 2020

Extrapolating from the impact of the SARS outbreak in 2003, QMA anticipates the coronavirus will have a sharp but short-lived impact on the global economy and risk assets. It notes that the SARS experience suggests risk assets will bottom only when the net number of new cases peaks, and, because it is not clear we have reached that point, equity markets are at risk of further declines in the near term.

Having trimmed its exposure to equities in January, QMA is maintaining its current equity allocation as it contemplates further risk reduction related to the virus and the outcomes of the Democratic presidential primaries. QMA notes that if equity markets were to sell off sharply (and experience greater drawdowns than they did during the SARS outbreak), it would view the declines as a buying opportunity and would likely add exposure to equities.

 

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