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Media
Financial Literacy

Covid-19 impact on financial markets, Dionysis Sinanos CFA

July 8, 2021

Let’s start with the medical definition of Coronavirus and the chronology of its expansion to pandemic. Covid-19 is a highly contagious disease caused by severe acute respiratory syndrome coronavirus 2 virus strain. From what we know so far, the virus was transmitted from animals and the first case was mapped in Wuhan, China in December 2019. Although there were reports of Covid-19 expansion during January 2020, few expected the rapid expansion of the disease globally and the labelling as “pandemic” in March, 11 2020.

At first instance, there was only a ripple in the financial markets. Everyone underestimated the consequences in the global economy, as investors were celebrating the “olive branch” of US to China and a normalization of their trade relationship. As a matter of fact, the S&P 500 fell -3.8% in late January before recouping the losses quickly in February. The 10 year T-Notes, acting as “safe haven”, retracted from almost 2% at the end of December to 1.5% in the same period.

When people started realizing the severity of the virus during February 2020, panic was taking the place of complacency. S&P 500 recorded losses of more than -35% in less than a month (until mid-March), amid high volatility. The central banks worldwide stepped up rate cuts and liquidity boosts, through large scale quantitative easing, to soothe the impact. The Federal Reserve acted decisively in March cutting the Fed fund rate from 1.75% to 0% and expanding its quantitative easing toolbox, with the purchase of government and corporate bonds, both in investment grade and high yield space. Following that “power act” from the central bank of the US, the Treasury yields collapsed, with the 10 year note yield falling to as low as 0.31%, whereas the stock markets eventually reachedfinding a floor level.

Greek Text:

Ας ξεκινήσουμε με τον ιατρικό ορισμό του κορονοϊού και τη χρονογραφία της επέκτασής του σε πανδημία. Το Covid-19 είναι μια εξαιρετικά μεταδοτική ασθένεια που προκαλεί λοίμωξη του αναπνευστικού συστήματος και μπορεί να κυμαίνεται από ήπια έως θανατηφόρα. Από όσα γνωρίζουμε μέχρι στιγμής, ο ιός μεταδόθηκε από ζώα και η πρώτη περίπτωση χαρτογραφήθηκε στο Wuhan της Κίνας τον Δεκέμβριο του 2019. Αν και υπήρχαν αναφορές για επέκταση του Covid-19 τον Ιανουάριο του 2020, λίγοι ανέμεναν την ταχεία επέκταση της νόσου παγκοσμίως και την επισήμανσή της ως «Πανδημία» στις 11 Μαρτίου 2020 από τον Διεθνή Οργανισμό Υγείας.

Στην αρχή οι επιπτώσεις στις χρηματοπιστωτικές αγορές ήταν ήπιες. Όλοι υποτίμησαν τις συνέπειες στην παγκόσμια οικονομία, καθώς οι επενδυτές αποτιμούσαν την ομαλοποίηση της εμπορικής σχέσης των ΗΠΑ με την Κίνα. Κατά την περίοδο εκείνη ο S&P 500 μειώθηκε -3,8% στα τέλη Ιανουαρίου πριν από την γρήγορη αποκατάσταση των ζημιών του τον Φεβρουάριο. Τα 10ετή T-Notes, ενεργώντας ως «ασφαλές καταφύγιο», υποχώρησαν από σχεδόν 2% στα τέλη Δεκεμβρίου σε 1,5% την ίδια περίοδο.

Όταν οι επενδυτές άρχισαν να συνειδητοποιούν τη σοβαρότητα του ιού τον Φεβρουάριο του 2020, ο πανικός αντικατέστησε τον εφησυχασμό. Ο S&P 500 κατέγραψε απώλειες άνω του -35% σε λιγότερο από ένα μήνα (μέχρι τα μέσα Μαρτίου), εν μέσω υψηλής μεταβλητότητας. Οι κεντρικές τράπεζες παγκοσμίως προέβησαν σε αποκοπές επιτοκίων και ενίσχυση ρευστότητας, μέσω

ποσοτικής χαλάρωσης μεγάλης κλίμακας, για να μετριάσουν τον αντίκτυπο. Ο Federal Reserve ενήργησε αποφασιστικά τον Μάρτιο μειώνοντας τα αμερικανικά επιτόκια από 1,75% σε 0% και επεκτείνοντας την εργαλειοθήκη της ποσοτικής χαλάρωσης, με την αγορά κρατικών και εταιρικών ομολόγων. Μετά από αυτήν την κίνηση από την κεντρική τράπεζα των ΗΠΑ, οι αποδόσεις των χρεογράφων κατέρρευσαν, με τα 10ετή κρατικά ομόλογα να αποδίδουν μέχρι και 0,31%, ενώ οι χρηματιστηριακές αγορές να φτάνουν εν τέλει στο κατώτατό τους επίπεδο.

PrevΟ Σύνδεσμος Χρηματοοικονομικών Αναλυτών Κύπρου, απο τον Evgeny Tarakanov CFA

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