Everyone is talking coronavirus, but I do not think you can discount the effect of the “Bernie Bug.” Those two issues collided this weekend and left traders unnerved.
I think in the short term, the volatility will take its course with some follow through and the direction will be tied to the latest news reports on the virus and election polls.
The markets have dealt with SARS and MERS in the past, but we did not have the level of interconnected economies back then, so this part is new. You may recall when the typhoon hit Fukushima, Japan a few years back and knocked out supply lines, beyond the disaster and loss of life, it was also economically disruptive and caused companies to review their supply chain management efforts. The Coronavirus will cause the same type of review to the extent it was centered in Wuhan, China and China produces a lot of components. The uncertainty of the global economic response has to come with a cost and this is what is reflected in the weakness today.
In a similar fashion, markets are struggling with a Sanders Presidential nomination and what the impact would be should he ultimately be elected (an outcome I consider improbable).
All comments and or suggestions are welcome.
Robert M. Bilkie, CFA
