As markets respond to COVID-19 outbreaks around the world, investors
wonder what’s next?
US stock markets have dropped 12.2% from their record highs on February 19.
Investors may be wondering how much lower they may go, or if they should get out of the
markets and wait it out. Although these actions may give investors a sense of control
over their investments, in reality, may be more damaging than doing nothing.
As investors become more pessimistic and worry about the expanding coronavirus
outbreak, the Federal Reserve made an unscheduled interest rate cut to try and steady
the economy. This added to market worries and treasury yields fell below 1% on March 3,
2020 – the first time in history.
Investors remain concerned and are flooding to safer and more liquid assets. Bond yields
are falling, and gold is rising. Concerns about the lasting effects of the virus on the global
economy weigh on investors’ minds as each day they read headlines about new cases
being identified around the world. But there are a lot of unknowns that investors are
worrying about today creating market volatility – something we haven’t seem for some
time. The chart below shows the extreme daily price movements we’ve seen in the past
couple of weeks compared to the beginning of the year and the historical average range.
Coronavirus: What should investors do?
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March 11, 2020