A new report from GLC Asset Management Group examining market reactions to the coronavirus, COVID-19, suggests that global markets probably won’t stabilize until the number of new cases has peaked. “This does not mean that equities will remain in a free-fall throughout the period of crisis, simply that volatility will remain elevated,” writes GLC’s chief investment strategist, Brent Joyce.
The GLC Insights report goes on to look at how markets have reacted to past epidemics and public health emergencies. With each episode, it says equities fell and gold and bonds rose in response. “After the peak of each episode, the market sell-off subsides,” say the report’s authors, “and equity markets typically recover six to twelve months later.”
The GLC 2020 Outlook, meanwhile, has called for a mild global rebound to occur in 2020. “Our overall view on the full-year outlook is little changed,” Joyce writes, adding that GLC does not expect to see a global economic recession imminently or on the horizon. “Corrections of 10 per cent or more are not an extraordinary or unusual move for stocks, especially given how hard stocks have run.”
He adds that the COVID-19 situation “is providing an opportunity to let some air out of the most overblown areas of the equity market.” (GLC says it adopted a slightly defensive position in the fall of 2019, largely over concerns about equity valuations.)
“Market corrections are uncomfortable,” he writes, “but we caution investors against emotional reactions that take them away from their well-balanced and risk aligned investment plans.”
