Unprecedented market downturn

12th March 2020
-IAM, News

Daniel Pfund, Senior Financial Analyst

The spread of the Coronavirus (COVID-19) outside China, particularly in northern Italy, triggered an unprecedented decline in European equity markets. Indeed, European indices have never experienced a correction (characterized by a drop of at least 10%) in such a short period of time. It took only 7 business days for the MSCI Europe to lose 10%. The situation is identical for the Swiss market (SMI).

What to expect from the markets now? According to statistics, it takes the MSCI Europe an average of 58 working days to return to its high after a correction. The question to be asked is what is the economic impact of COVID-19? No one knows, but we remain confident because already in China the number of new cases is starting to decline. Moreover, if history can guide us, there have already been many similar contagions in the past, each time resolved and the financial markets recovered afterwards.