Investors are in a state of shock rattled by the drumbeat of bad news. It is hard to ignore the noises coming from the markets; virus risks, bear market, recession risks and oil shock are dominating headlines fuelling the panic.
During such periodic bouts of volatility, rather than catching the safety wagon, some investors might look for trading opportunities by being selective about certain categories of assets or stocks within certain industries.
Virus fears are spiralling and causing carnage in the financial markets. Investors are not looking at the virus in isolation but are mostly reacting to how an added layer of uncertainty is weighing on an already fragile global economy.
The current situation is unnerving to investors and even though it is difficult to predict a bottom, the markets would eventually find a floor. We, therefore, expect elevated volatility to persist in the coming weeks as market participants will be busy monitoring any developments.
Short-term buying opportunities will likely be conditional on the extent of monetary and fiscal intervention.
Medium-term will be more challenging as investors will be assessing the impact of the pandemic to recalibrate growth and expectations.
Another wave of monetary easing policy has hit the financial markets following heightened fears of a supply and demand shock over the wider spread of the coronavirus. After the Fed, BoC, and the RBA, Bank of England joined its peers and slashed interest rates by 50 bps. The ECB was the biggest disappointment for markets as the central banker did not cut interest rates.
In an era of low-interest rates, central banks are running out of ammunition to support the ailing economy. This week we have seen that governments responded to the chaos in the markets with fiscal promises. Australia and the US were among the first to announce an economic stimulus plan but failed to reassure investors.