Even as fears about the spread of the coronavirus have sent global stocks tumbling, one of Wall Street’s biggest banks is urging investors to stay the course.
Analysts at JPMorgan have yet to budge from their positive view on global equities, in part because they say similar health scares historically have failed to derail even local stock markets, which can be the most vulnerable to the economic consequences of a virus pandemic. Instead, a team led by Mislav Matejka underscored that past outbreaks served as “buying opportunities, rather than the reasons for sustained selling,” in a Monday client note.
Even though the coronavirus remains in its early stages and “is likely to worsen before getting better,” JPMorgan analysts stressed that prior global health scares failed to unsettle equities for an extended period.
Their prognosis could give some comfort to stock-market investors across the world who have taken a hit since last week. Health officials in China already have reported more than 2,700 cases and 80 deaths due to the illness.
For their analysis, JPMorgan staffers looked at how local equity markets reacted to four previous health crises in the last two decades: severe acute respiratory syndrome, or SARS, swine flu, Ebola and Zika.
During the depths of SARS, the closest comparison for the recent coronavirus outbreak, the MSCI Hong Kong index EWH, -3.64% shed around 9.3%, based on when global interest in the virus started to show up until it started to peak, a measure gauged by the number of news stories written about the topic.
After this peak, Hong Kong shares jumped 9.8% in a month, and then 17% in three months.
“The more equities fell initially, the more they subsequently rebounded. These episodes did not lead to a prolonged period of selling, and were the buying opportunity within weeks,” JPMorgan analysts wrote.