Equity markets falling into the weekend

Everyone likes the weekend it seems, apart from the equity markets. They have fallen on 5 of the 6 Fridays in 2020. Take a look at the table below which shows the MSCI All Country World Index with Fridays in 2020 circled in red. The only positive day was Friday, January 17:

Today, Friday, the current Asian equity market is mixed with the Hang Seng and Shanghai Comp in positive territory and the Nikkei in the red and S&P500 futures around flat. The obvious reason for the fall in equity markets into the weekend is that the coronavirus might show signs of spreading over the weekend and no-one wants to be long on equities and risk a large gap down in price on the open. It’s understandable.

Latest methodology in calculating coronavirus cases confuses markets

So, on February 13, the total number of new cases was just under 15K. That was a massive jump in reported cases due to the way the definitions of infection were changed. From the non-medical background, it was now something like a CT scan showing damage to the lung and fever was now enough to confirm the diagnosis. This spike in reported cases was enough to cause risk-on traders to pause. What’s going on here? Is this Chinese underreporting and now they are finally coming clean? Conspiracy theories abound. Chinese health officials have been sacked. Is this malicious or just trying to limit the spread of fear? For us, the most likely explanation is that the coronavirus is more contagious than thought but less deadly than feared. The WHO is certainly not too concerned about the new levels of cases from Hubei. ‘Most of this was down to Hubei using a broader definition to diagnose people’, said Mike Ryan, head of WHO’s health emergencies programme. “This does not represent a significant change in the trajectory of the outbreak,” he said. It is not an easy story to unpick. Is this a global pandemic. Yes, it probably will be. Will it be a ‘severe’ pandemic? Probably not. That’s a tough path to take.

Waiting game

This is now the game in town. Watching and waiting to see whether the cases are dropping or picking up. Today was more of relief with a reduction of new cases to 4823 cases and 116 additional deaths to February’s figures. However, be aware that equity investors may well be taking their cash off the table into the weekend in case there is any change in the spread of the coronavirus. So, watch out for another potential Freaky Friday. I, personally, will not be long equity markets into the weekend. Why take the risk?