06th Mar 2020 by Helge Kostka

Wash Your Hands and Then Sit on Them. A COVID-19 Update

Wash your hands

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Stocks and Bond Markets

As we communicated last week the world's stock markets suffered a significant sell off last week and were down c. 10.5% [1] culminating in the worst weekly performance since October 2008 during the Global Finance Crisis. In the last hour of trading on Friday, however, the US stock markets rallied more than 2.5% paring some of the losses from the week.

This week started off strong for equities as markets rallied posting the best single day return in over a decade on Monday on the expectation of a FED rate cut but fell on Tuesday post the news of the  Federal Reserve lowering rates.  Stocks rallied again on Wednesday after Joe Biden’s massive Super Tuesday win and the expectation that Bernie Sanders is less likely to win the Democratic nomination - the DJIA posted its second-highest point gain ever; it was the second time in three days that the US index swung 1,000 points or higher.  On Thursday stocks fell again despite Inovio Pharmaceuticals claiming they were starting human trials on a COVID-19 vaccine.  And as at the time of writing, equities were down again in Europe and Asia.
 
During the past two weeks, yields on the 10-year US Treasury bond fell significantly to their lowest level ever (c.0.90%) and long-term bonds gained in value partially offsetting losses and dampening volatility in diversified portfolios.
 
Origins and Location of COVID-19
 
The main culprit for the volatility was the spread of the COVID-19 outside of China mainly in South Korea, Italy and Iran.  COVID-19 originated in Wuhan, China in December and since then there have been more than 96,888 reported cases resulting in 3,305 deaths. Most of the fatalities (3,013) have been in China and the vast majority (more than 95%) in the Hubei province of China, where Wuhan in situated.  As of March 5th, there have been c.16,466 cases reported outside of China (more than 80% of which are in S. Korea, Italy, Iran or from the Diamond Princess cruise ship) and 292 deaths[2], up from 67 late last week[3].

 


[1] MSCI All Country World Index.  Source: Morningstar

[2] As of March 5th, 2020 at 15:13 GMT

[3] February 28, 2020

 

Source: John Hopkins CSSE March 5th, 2020 15:13 GMT

 

Although the disease is starting to spread outside China, the number of new reported cases in China is falling and the number of existing cases is now far lower than the cumulative confirmed cases as most people have recovered from the virus: