This Too Shall Pass (Eventually) – March 2, 2020



This Too Shall Pass (Eventually)

The COVID-19 crisis triggered a panic in the global financial markets last week, as investors moved to discount a recession and emergency interest rate cuts. No doubt there will be significant economic weakness in the near run, as the effects of public health countermeasures hit economic activity. More monetary stimulus is coming even though interest rates were already near historic lows, but weak economic data and corporate earnings disappointments will be a drag on equities for some time.

Away from the frightening headlines there is a glimmer of hope, as discussed in a special report from MRB Partners,which updated our latest analysis on how the epidemic is likely to proceed. The bad news is that the virus has now gone global and will undermine economic activity outside of China. However, as is becoming apparent in China, the number of new cases is falling and the trend in recoveries is encouraging. While still sporadic, economic activity is starting to resume in parts of China, i.e. there is some light at the end of the tunnel.

Short-term cautiousness is warranted, as COVID-19 spreads and investors increasingly fret about health problems and recession. However, beyond the next month or two, we expect the turnaround in China to gradually spread abroad, and for investors to eventually calm. Stay tuned.







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