Chief Investment Strategist and Chief Economist
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We consider the potential economic and investment implications of the coronavirus outbreak
The new coronavirus is likely to prove considerably less deadly overall than the common seasonal flu. Despite this, the precautionary measures taken to fight such outbreaks - such as travel bans and quarantines - have significant short-term negative economic effects. The fact that about 98% of confirmed cases to date remain in China with a 3% mortality rate suggests a containable crisis. China and perhaps Hong Kong will suffer large drags to service sector activity. Like the case of SARS in 2003, we would see a significant market drop as a strong potential buying opportunity thereafter. World markets more broadly are likely to see a more volatile period just ahead which is typical after large equity market gains. Our overweight to gold and US Treasuries should help diversified portfolios. Active hedgers may still see some value in shorter-term hedging instruments.
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