Question of the day

This question appeared on Bloomberg Market’s Live this week: What are you looking at for safety in the current concerns over coronavirus?

  • Treasuries: One of the first ‘go-to places’.
  • Gold: Another quick go-to place for the value. Short term it makes sense for a quick spike, but longer-term the improving US outlook means that gains should be capped.
  • Bitcoin: Sometimes mirrors gold as a digital ‘gold’, but for some investors, the jury is still out on whether bitcoin is here to stay or is the first flush of a changing digital age that may or may not be here. In our view, when investing in a safe haven on the coronavirus fears, we would favour gold over bitcoin every time. Is that just an unfair bias and unnecessary conservatism, or sensible? Anyone take the other view?
  • Tech stocks: Seen as less vulnerable as industrial, finance or energy stocks. Perhaps long health stocks?

Other areas to look at

  • Vanilla short on stocks? This was our preference last week. With equities getting hit, shorting the major indexes makes sense for a trade. We got into Nikkei shorts last week seeing the storm coming and risk looked pretty asymmetrical to us.
  • Shorting travel and tourism stocks. Look for individual stocks particularly exposed to the fallout from the coronavirus.

Ok, that gets the conversation started, now over to our seasoned readers. What is your preferred source of value? Does anyone here have a playbook from 2003 that they used? Our view from here is that the coronavirus fears have peaked. We took profit on our Nikkei future shorts yesterday when we saw the reaction of the MSCI Asia Pacific Index and the S&P500 when, during the 2003 SARS virus, they gained in value as the WHO declared SARS a global health emergency. See the chart below which shows the S&P500 fast out of the blocks shortly after the March announcement. It was March 12th when they issued their global threat announcement.

Our view is that a bottom is in place now unless the coronavirus is seen to be more deadly than SARS. Yes, coronavirus is contagious, but it is not as deadly, at present, as SARS.