What’s Going On Here?

As coronavirus fatalities in Europe and the US show signs of letting up, analysts at investment bank JPMorgan think they can see an end to stock markets’ steep decline.

What Does This Mean?

• JPMorgan looked at the relationship between newly reported coronavirus cases and stock market volatility, and it found they’re positively correlated.
• So it stands to reason that if reports of new coronavirus cases slow, volatility – as measured by the “Volatility Index”, which has fallen from its recent near-record peak (although still higher than it’s been in the last 5 years) – will continue to fall. And that, the bank argues, could set the stage for stock prices to start drifting back up.
• JPMorgan’s theory is about to be put to the test:
  • American coronavirus fatalities fell for the first time,
  • New data also showed fewer new reported cases in Spain and Germany.

Why Should I Care?

For markets: You thought JPMorgan was hopeful? Lol.

• Investors bought up stocks around the world on Monday, though not necessarily thanks to JPMorgan. They had probably been waiting for the first sign of stabilization after several analysts pointed out that the quicker the virus is contained, the quicker the stock market will recover.
• Besides, JPMorgan’s analysts aren’t actually that optimistic: they reckon the key US stock market index, the S&P 500, could at best rise by 8% this quarter – and at worst fall another 20%.

For you personally: Something for everyone.

• Investors comfortable with high-risk bets might instead try to identify individual companies that could benefit from the current situation and any eventual recovery.
• A safer route for long-term investors is to buy into the stock market as a whole (via an ETF, maybe), and benefit from diversification. Even if stock prices fall in the near term, after all, they tend to rise over time.

Content source: Finimize. (2020) Climb And Punishment. Available from: https://www.finimize.com/wp/news/climb-and-punishment/ [Accessed 7 April, 2020]