Since the Covid-19 outbreak first emerged in January, the primary concern among economists and investors revolved around how a temporary paralysis of the Chinese economy — the world’s second largest — would affect global supply chains.
However, Yousef Abbasi, Global Market Strategist at INTL FCStone Financial Inc. – Broker-Dealer Division pointed out during INTL FCStone’s Vision 20/20: Global Markets Outlook Conference, that as the disease moved toward the west, “at this point the market is resigning itself to the fact that the impact of the coronavirus is going to be well beyond China and the first quarter of 2020.”
“When you start to impact Western Europe and when you start to impact the United States, now you’re impacting the global economy way more significantly because you’re impacting these demand markets,” Abbasi said emphasizing on the fact that the pandemic is no longer impacting only the supply side of the equation. In his opinion, it is very important to «asses how the demand side is going to be impacted while the virus is spreading in the west.»
The strategist believes that given the current environment, «it is very tough to look at fundamentals,» mainly because there is very little clarity as to how long will this outbreak last, or when the economy can restart, and also because of the fact that when the curve does start to flatten, that doesn’t mean we can return to normal behavior. «If we do return to normal human and economic behavior, we risk the chance the curve goes parabolic again. Just from the perspective of how long this potentially can last, there’s still a great deal of uncertainty,” he said.
Other things to look at this year are the 2020 Elections, which could be a «potential catalyst,» and the Fed’s guidance regarding inflation.