Coronavirus: A catalyst for stock market crash in 2020?

A lot of investors are currently asking about the impact of the coronavirus which broke out in December 2019 with respect to their domestic and offshore portfolios and its impact aggregate global growth 2020.

We have seen massive volatility in the market since the epidemic broke out causing lots of fear and panic bearishness amongst market investors.

In this article we aim to look at the impact of COVID19 since it broke out and became a global epidemic to date, we try to analyze its market movement effect through index level fluctuations around recognized equity indexes globally.

Let’s start with a brief history, the 2019 COVID-19 outbreak in Wuhan city in the Hubei province china isn’t the first time a global outbreak of this nature has developed emanating from china.

In fact, the most recent outbreak the world can remember is the SARS (Severe Acute Respiratory Syndrome) outbreak identified in 2003. SARS – COV is thought to be an animal virus from an as-yet-uncertain animal reservoir, perhaps bats, that spread to other animals (civet cats) and first infected humans in the
Guangdong province in southern China in 2002. SARS affected 26 countries and resulted in more than 8,000 cases in 2003. What the world is experiencing today is COVID -19 which was first reported in December, 2019 in Wuhan city in China which is believed to have been transferred from animal to human through ingestion is a respiratory illness caused by a new virus called Coronavirus.

The COVID-19 symptoms are very similar to SARS-CoV.

Market Opinion

Our global report on the forecast of markets 2020 which was published in January fundamentally forecasted the Eurozone and China significantly slowing in terms of growth undershooting.

We also pointed out that the U.S. market would be range bound slowing but still outperforming relative to the other economic zones. We stated that some emerging market countries that were likely to rebound upon past monetary and fiscal stimulus starting to kick into their economies.



We highlighted our expectance for further monetary easing by Central banks amidst tight fiscal policies which may begin to ease up too around the globe.

In all my years in the financial markets I realize uncertainty and surprise spooks the market talking about recent trade war tensions U.S-China, surprise tariffs announcements by President Donald Trump just to mention a few.

The exogenous shock of the COVID –19 has had analysts reviewing global growth
downwards due to fear, panic and aggressive containment methods employed by economies to battle the pandemic as these may stall or impact badly on economic activity. The fallout of Russia and Saudi Arabia on OPEC+ that caused oil price crash on Monday further exacerbates the fear and panic of the COVID-19 effects this translated into the worst one day crash in the U. S. stock
market in almost 30 years.

Our basic chart analysis shows us that the SARS epidemic of November 2002 to July 2003 after containment and drop in new cases saw a boost back to risk-on in markets. This is evident in the V-shaped recovery seen across the various indexes as at 2003 containment of the disease.

We do not know the exact period when the COVID – 19 would be contained that we see a drop in new cases or a vaccine found, so we start see a recovery but our strategy to take advantage of this volatility in markets is to target potentially strong but beaten down sectors due to the exogenous shock. We aim
to ride on recovery.

We expect a recovery of the markets in 2020 is very probable as we do not believe the coronavirus to be the catalyst for a stock market crash in 2020. Again we do not believe the U.S would enter a recession in 2020. We further point caution that we expect a slower V-shaped recovery of markets than the SARS epidemic recovery in 2003 as a move back to normalization currently would be to an already fundamentally weak growth 2020 prospective outlook.