The Corona virus: What to expect?
The fast spreading of the Corona virus is rattling financial markets in reminiscence of the deadly 2002/03 SARS epidemic.
- The fast spreading of the Corona virus is rattling financial markets in reminiscence of the deadly 2002/03 SARS epidemic.
- Indeed, Corona is spreading even faster than SARS as it is deemed infectious during incubation. Also, given China’s heavier weight in the world economy (19% today vs. 9% in 2003) the potential damage to global growth is even stronger.
- That said, there are important mitigating factors. The mortality rate among infected people is lower (2-3% vs. 10% for SARS), and the reaction by Chinese authorities has been much swifter and stronger this time. Medical advances will likely facilitate a much quicker development of vaccine, too.
- Markets tend to overshoot as the number of cases rises exponentially. Past evidence shows a V-shape recovery once the number of new cases per day starts to slow. Investors know this, and some will try to front run the turn in sentiment.
- The near-term outlook is shaky (and more so as the first US primaries are around the corner) but unless the drastic measures to contain the spreading fail, we expect this to be a buying opportunity.
Read the full publication below.
THE CORONA VIRUS: WHAT TO EXPECT?
COVID-19 FACTS & FIGURES
Pfizer and BioNTech candidate Covid-19 vaccine showed to be 95% effective in early analysis, an even better result compared to data released last week. Moderna candidate Covid-19 vaccine showed to be 94.5% effective in early trials involving 30,000 people. Switzerland announced ICU beds reached full capacity and no extra units are available. Oxford and AstraZeneca Covid-19 vaccine test results are expected by late December.
EUROPEAN DEFAULTS LIKELY TO STAY LOW
Since March, credit markets have retraced a large part of the Covid-related spread widening, alongside rebounding risk sentiment. Although the rally has been substantial, it has remained defensive with IG outperforming HY on a beta- adjusted basis. The main reason in our view have been concerns about rising defaults.
US: SPLIT GOVERNMENT NOT TOOTHLESS ON GROWTH
Narrow margins in several key swing states sent Democratic candidate Joe Biden to the White House. However, Republicans are more likely than not to keep the majority in the Senate, with voters in Georgia having their final say on two decisive seats on Jan. 5.