Does 2019-nCoV matter for markets?
The coronavirus has added uncertainty to an otherwise low-volatility market environment. Recent developments suggest that the spread of the virus can be contained.
Global financial markets have reacted strongly to rising concerns over the spread of a novel coronavirus. After starting the year on a positive note, most risky assets took a dive at the end of January when the outbreak intensified, though most of this correction has now been recovered.
In the near term, we expect more volatility as a result, but ultimately, we see this as a temporary phenomenon that should only marginally affect global economic growth and markets.
The huge withdrawal of central bank liquidity happening currently is truly “unprecedented” (an otherwise-overused term currently). Despite all of the detailed analysis on the effects of quantitative tightening no one can predict the full impact this will have, but it is certainly not Fed Chair Yellen’s 2017 expectation of “watching paint dry”.
Inflation continues to drive recession worries. US inflation continues to drive recession worries with CPI running at 8.6% YoY in May.