Market Update from the Global Asset Allocation team – March 2020
Investor anxiety morphed into panic in February. Financial markets were rattled by the latest headlines around the novel coronavirus, with investors attempting to gauge the severity of the widening epidemic and the implications for global growth. While the outbreak has slowly been abating in China and businesses have gradually resumed operations, news that the deadly virus has spread outside of China (to Korea, Japan, Iran and Italy) has stoked fears of a wider pandemic and a more pronounced global economic slowdown. Risk appetite dwindled in response, with the gloomy mood manifesting itself and sending shockwaves through the global marketplace.
After breaching all-time highs, global equity markets abruptly reversed course and entered full-blown correction-mode in February. The MSCI All Country World tumbled lower, while the S&P 500 dropped over 15% from its mid-February record high. The S&P/TSX also got caught up in the wave of selling, while MSCI’s gauge of emerging market stocks outperformed their developed market peers and fell more modestly as investors embraced pledges from Chinese policymakers to revive the economy.