Asset prices are being hit following the spread of the Coronavirus. When compared with the SARS outbreak in 2003, asset prices are impacted more. Over the past days, US stock indexes continued to plummet. In this article, we shall be discussing some of the reasons why markets are being affected worse.
The fears surrounding this virus which originated from Wuhan prompted several investors to move from risk assets to safe havens. As the virus has claimed over a hundred lives and thousands have been infected, the ripple effects of instability can be felt.
The speed at which major risks impact asset values is much higher than that of previous years. Over the past decade, risk velocity has increased. Why could this be?
Social media
Social media, which is accessible across various devices has made the dissemination of information extremely fast. Any news which is of material relevance is immediately echoed across the whole world. The constant stream of news related to this virus has placed many people on edge and automatically increases the fear and anxiety levels.
The cross-border supply chain
Companies which may be based in other continents can have their business less affected. With that said, those who rely on companies located in China for the production of their goods may be heavily impacted. As such organisations may need to close down, companies based in other continents will feel the hit as well.
One will need to constantly monitor developments as they unfold. Whether investment assets will stabilise and improve will depend on how this virus is contained and its overall impact. A potential cure would also help with improving economic trends.
Although the economic prospects for 2020 were positive, if the Coronavirus becomes greater in its impact and persistence, such forecasts may be badly hit.
