{"id":8527,"date":"2020-03-02T21:26:18","date_gmt":"2020-03-02T21:26:18","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8527"},"modified":"2022-02-26T13:06:44","modified_gmt":"2022-02-26T13:06:44","slug":"coronavirus-roils-markets-chinas-global-impact-surviving-volatility","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/coronavirus-roils-markets-chinas-global-impact-surviving-volatility\/","title":{"rendered":"Coronavirus Roils Markets, China\u2019s Global Impact, Surviving Volatility"},"content":{"rendered":"\n<p>In today\u2019s Steady Investor, we look at what is\ngoing on in the markets and our key takeaways and questions for investors to\nconsider, such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Market volatility in response to coronavirus<\/li><li>The impact of China\u2019s economy globally<\/li><li>How to react to market volatility<\/li><li>An\nanecdote for the 21st century economy<\/li><\/ul>\n\n\n\n<p><strong>Market Volatility as\nCoronavirus Spreads \u2013 <\/strong>For weeks, the equity markets seemed to shrug off the\npossibility of negative impact from a spreading coronavirus. But the tone\nchanged this week, as the S&amp;P 500 posted sharp declines early in the week\nas confirmed cases grew sharply across the world \u2013 particularly in developed\neconomies like South Korea, Japan, Italy, and even here in the US. While\nequities sold off sharply, the yield on the 10-year US Treasury fell to a\nrecord low and oil prices dropped below $50 a barrel \u2013 all signs of growing\ninvestor concern over demand and economic growth in the coming months and\nquarters. In our view, volatility is likely to persist as investor attention is\ndecisively shifted away from fundamentals (revenues and earnings) and towards\nthe unknown (headlines). In short, we believe the <em>fear <\/em>of the coronavirus as a global pandemic is arguably greater,\nfor now, than the actual economic impact it is likely to have. While we do not\nmean to downplay the seriousness of the outbreak, history suggests that the impact\nto growth and market performance \u2013 and the grip that the outbreak holds on global\npsychology and confidence \u2013 will be temporary, in our view.<sup>1<\/sup> <\/p>\n\n\n\n<p>_________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/bear-market-survival-guide?source=website&amp;medium=blog&amp;term=steadyinvestor_blog_bear_market_zim_03_03_2020&amp;content=bear_market_survival_kit_report\">Sooner or Later, The Bear Will Wake Up. Are You Ready?<\/a><\/strong><\/p>\n\n\n\n<p>As the market dropped this week, there is no doubt\nthat many investors fear a bear market is around the corner, and considering\nthat we\u2019re still in the longest bull market ever, many think a turnaround is\ninevitable.<\/p>\n\n\n\n<p>But don\u2019t despair. Bear markets are a natural (if\nunpleasant) part of the economic cycle, and you can potentially avoid the most\nharmful hazards of a bear market on your investments by making use of some\nuseful tools we offer in our free guide.<\/p>\n\n\n\n<p>If you have $500,000 or more to invest, get our free\nguide today. You\u2019ll learn some of the most common indicators of recession, and\nget our viewpoint on the most important moves you can make to weather a\nrecession. Don\u2019t wait\u2014get this guide before the storm hits.<\/p>\n\n\n\n<p><strong>The Zacks <a href=\"https:\/\/go.steadyinvestor.com\/bear-market-survival-guide?source=website&amp;medium=blog&amp;term=steadyinvestor_blog_bear_market_zim_03_03_2020&amp;content=bear_market_survival_kit_report\">Bear Market Survival Kit<\/a><\/strong><sup>2<\/sup><\/p>\n\n\n\n<p>_________________________________________________________________________<\/p>\n\n\n\n<p><strong>China\u2019s Economy\nMatters, A Lot \u2013 <\/strong>When the SARS outbreak happened in 2003, China\u2019s share of\nthe global economy was about 10%. Today, however, China accounts for double\nthat figure (20%) while also holding the title as world\u2019s largest manufacturer.\nChina\u2019s burgeoning middle class also showers money around the world, with\ntourists spending approximately $260 billion a year. These economic\nfundamentals place China and the global economy in a precarious position: one\non hand, the economy benefits from sending people back to work and restarting\nfactory operations. On the other, restarting the economic engine risks\nspreading the coronavirus even further and for longer. To underscore just how\nimportant China\u2019s economy has become on the global stage, consider that over\nthe last five years, the three most material sell-offs in the S&amp;P 500 index\nhave had ties to China. There was the yuan devaluation in 2015, followed by downside\nvolatility connected to the US-China trade dispute in fall 2018, followed by\nthe selling pressure we\u2019re seeing today connected to the coronavirus.<sup>3<\/sup>\n&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong>An Anecdote for the\n21<sup>st<\/sup> Century Economy \u2013 <\/strong>The iconic American company, General\nElectric, cut its workforce by 78,000 in 2019, bringing its total number of\nemployees back to levels not seen since 1951.<sup>4<\/sup> As General Electric\nslashed jobs and made efforts to cut costs, other companies within the services\nsector went on a hiring spree \u2013 the healthcare sector added 361,000 jobs over\nthe last 12 months, transportation and warehousing added 106,000, leisure and\nhospitality added 288,000 jobs, and professional and business services added 390,000.\nThis anecdote for the 21<sup>st<\/sup> Century economy is a display of the continued\nrotation of the economy from a manufacturing\/industrial economy to a service\nand consumption-based economy.<sup> 5<\/sup> In our view, investors should be\nposturing over time for this evolution to continue apace, with no looking back.\n<\/p>\n\n\n\n<p><strong>How to\nReact to Recent Volatility?<\/strong>&nbsp;One challenge that many\nequity investors are facing is how to react to current volatility. In our view,\nit is important to remember that volatility is a normal part of the ebb and\nflow of the markets. We believe the key is not to look for ways to eliminate\nit, but to develop a mental approach to dealing with it.<\/p>\n\n\n\n<p>Volatility and bear markets are a natural (if\nunpleasant) part of the economic cycle, and you can potentially avoid the most\nharmful hazards of a bear market on your investments by making use of some\nuseful tools we offer in our free guide, \u201cThe Zacks Bear Market Survival Kit.\u201d<sup>6<\/sup><\/p>\n\n\n\n<p>If you have $500,000 or more to invest, get our\nfree guide today. You\u2019ll learn some of the most common indicators of recession,\nand get our viewpoint on the most important moves you can make to weather a\nrecession. Don\u2019t wait\u2014get this guide before the storm hits.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fear of pandemic drives down economy, US moves further toward service economy, plus more<\/p>\n","protected":false},"author":3,"featured_media":7426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-8527","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8527"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8527\/revisions"}],"predecessor-version":[{"id":10632,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8527\/revisions\/10632"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}