As Wuhan Coronavirus (2019-nCoV) spreads, capturing more public attention about the many uncertainties and risks associated with the virus, financial markets have reacted. The increases in infections and deaths have pressured equity markets worldwide and boosted safe-haven sovereign bond prices. The flight to safety, for example, briefly pushed the 10-year Treasury yield down to 1.53 percent, a six-month low.
The economic and market impacts stemming from the outbreak could be material, especially for China and global industries that are most affected, such as travel and segments of transportation. But ultimately the impact should be transitory, in our assessment.
Compared to the 2003 SARS outbreak, Chinese authorities and other countries appear better prepared to deal with public health crises, underscored by improved transparency, pre-emptive measures to restrict travel, and a worldwide push by scientists to develop treatments and vaccines.
At this stage, we don’t think the outbreak warrants making major changes to investment portfolios for long-term investors. But we would refrain from putting new money to work in equities, particularly in emerging markets, until at least the number of new cases and fears surrounding the spread of the virus have peaked.