S&P 500[1], Gold[2], Crude Oil[3] & Forex Analysis
- Coronavirus Has Rattled Global Financial Markets
- S&P 500 Typically Sees a Limited Impact from Virus Outbreaks
- AUD[4], NZD[5] & CAD[6] Outperformed During SARS, However, Macro Trends Matters
- Gold Rises on Virus Outbreaks, Oil Slumps
The outbreak of the Wuhan Coronavirus has rattled financial markets across the globe, although much is unknown as to whether the outbreak will expand to a pandemic and what the size of the impact will be.
In order to gauge the potential impact of coronavirus, this article will compare previous virus outbreaks and trends across the S&P 500, major commodities and currencies.
With that said, we are cognizant to the fact that China is more connected to the global economy, contributing a growing proportion to world GDP (~20%) compared to 2002-03 (~5%) when SARS broke out. Furthermore, the mortality rate of the Coronavirus is materially lower than SARS at 2-3% vs 9.6%, which has eased concerns.
However, it is quite clear that there are increasing concerns about Coronavirus as it continues to spread, and this is reflected in the chart below. The data shows that the rising number of searches in Google is at its highest on record, surpassing the peak in 2009.
How Past Virus Outbreaks Have Impacted the Financial Markets
Equities
Across equity markets, S&P 500 generally performed better against its counterparts during virus outbreaks, while the DAX 30[7] had been the most negatively impacted during the SARS outbreak. However, despite equity markets initially coming under pressure, weakness was typically temporary with global equity markets showing a sharp recovery. Alongside this, the most adversely effected stock markets tended to show the strongest rebound.
