Cambridge Weekly Update – 26th February 2020

COVID-19 and the reaction of markets to pandemic fears

Global equity markets have taken a significant hit this week, as investors started to take news of COVID19 spreading beyond China to the rest of the world more seriously. We thought it would be a good time
to consider the historical impact of previous pandemics on global investment markets, as well as assessing
some of the likely outcomes we can expect this time round.

The chart below (from Alpine Macro and Charles Schwab) shows when those episodes occurred in relation
to global equity market returns. The data suggests that past epidemics have not resulted in any significant
or long-lasting damage to global stock prices. While certain economies and markets have been negatively
impacted for short periods, most of these potential worldwide pandemic threats have proven to be just
that – potential.

Read the full commentary here