As coronavirus cases continue to escalate in several new regions, like South Korea, Italy, Japan, Iran, Singapore and the United States, Raymond James Healthcare Policy Analyst Chris Meekins believes we are now in the midst of a COVID-19 pandemic.
The word itself isn’t intended to cause panic, but rather to prompt increased awareness of the potential economic and health effects of this rapidly spreading virus. Meekins believes the United States now faces a 1 in 3 chance of a widespread outbreak given recent events.
Unfortunately, the illness – thought to have originated in Wuhan, an important Chinese manufacturing hub – has taken its toll on equity markets, causing disruption in several industries, including travel and energy, as well as major supply chains in India and China. Amid the trade war, supply chains generally migrated away from China to places like Vietnam, Thailand and Mexico; however, global supply chains are deep and complex, and disruptions have already led to halts in motor vehicle production in Japan and South Korea, explains Chief Economist Scott Brown. U.S. firms also face a loss of sales to the Chinese market, he notes.
In addition, oil fell on concerns over weakened Chinese demand and the risk of further demand impact outside the Asia-Pacific region. However, Raymond James energy equity research analyst Pavel Molchanov believes oil prices should recover by year’s end, overcoming the virus-related demand headwinds. The current production outage in Libya is also helping to “cancel out” some of the demand headwinds.
While volatility is likely to continue to weigh on certain sectors until the virus is contained, any pullback could be viewed as a potential buying opportunity within favored sectors as the overall fundamental backdrop remains supportive of equities, according to Chief Investment Officer Larry Adam. I believe opportunities to add fundamentally sound positions to your portfolio may present themselves over the near term. I will, of course, continue to monitor the news for indications of broader impacts and share any developments with you.
My thoughts are with all those affected. I hope the global response to contain the deadly respiratory disease proves effective soon and that increased public awareness will deter the spread of the virus. To learn more about how to protect yourself and your family, please visit cdc.gov for updates.
As always, please reach out to me with any questions you may have. Thank you for your trust in me.
Tyler has been in the financial services industry since 2004 and with Sandstone Wealth Management and Heartland Bank since 2009. He is Series 7, 66 and Insurance licensed to assist his clients with all their investing, financial planning, and insurance needs. Tyler was recently named to the Forbes List of America's Top Next-Generation Wealth Advisor, which recognizes advisors from national, regional, and independent firms. Tyler graduated from the University of Nebraska-Lincoln with a Bachelor’s Degree in Diversified Agriculture and was born and raised in the Nebraska Sandhills. This gives him an intimate knowledge and understanding of his farming and ranching clients. Tyler is married to Rachel, who earned her Doctorate of Pharmacy from the University of Nebraska. They have two children, Camilla and Cooper. Away from business, he enjoys officiating high school basketball in the winter as well as golfing and team roping in the summer.
