Will The Coronavirus Spell The End Of The Bull Market?
Based on what we know today, I don’t see the damage as being that extensive. First, when you look at the new cases, you can see that they are not exploding but are holding fairly steady around the world. If you look at the number of active infections, you can see that number dropping. The disease itself seems to be moving toward “under control” status.

That direction might change, of course, but the best place to look when trying to determine what is likely to happen is China itself. China is where the disease emerged first and where it is farthest along. In China, the disease seems to be largely under control. That does not mean we will not see more cases around the world. It does imply that control is both possible and achievable, which is substantially different from what the headlines are saying.

As investors, we can also look at China for what might happen in global markets. Here, the news is also encouraging. China’s CSI 300 Index is at a new 52-week high after recovering all of its losses from the coronavirus outbreak and then some. While you might say the Chinese market is manipulated, we also see a substantial recovery in the U.S.-based ETF that tracks the index, which closed yesterday within 2.5 percent of its 52-week high. Investors in China clearly think that any damage from the coronavirus will not be all that bad.

Given these facts, and the ongoing strength of the U.S. fundamentals, it looks to me to be premature to call for the end of the bull market. Unless this epidemic gets worse, and it might, signs are that this will be one more exaggerated obituary.

The Real Risk
The real risk, beyond the virus itself, will be the potential damage to consumer and business confidence. Here, again, the news remains good—but we will certainly be watching it. Big picture, however, the watchword for investors and the bull market remains keep calm…and carry on.

Brad McMillan is the chief investment officer at Commonwealth Financial Network.

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