Dow falls over 1,000 points on virus fears, what next?

Dow falls over 1,000 points on virus fears, what next?

Fears over an escalation in Covid-19 around the globe jittered global markets on Tuesday, resulting in the biggest single day selloff in equities seen in nearly two years.

What may have concerned investors is how this epidemic will change consumer behaviour and investment sentiment across Asia and Europe.

Retail, tourism, hospitality, transportation, consumer discretionary and F&B sectors may face more headwind in the months to come, as countries ramp up measures to contain the virus spread.

This morning, safe-havens came off from Tuesday’s highs, suggesting a quick restore in calm following yesterday’s panic buying. Gold price fell as much as 2.6% to US$ 1,644 from a seven-year high of US$ 1,689 seen yesterday. A pullback was also observed in Japanese yen and US treasuries this morning, suggesting some relief in tensions as Asian markets open.

Dow Jones tumbled over 1,000 points, or 3.56% overnight, with all sectors ending lower. Healthcare (-5.22%), materials (-4.27%), information technology (-4.25%), energy (-4.2%), industrials (-3.46%) were among the worst performing sectors.

Covid-19 have given investors a reason to take profit from the record-high US equities, which are now trading at around 22 times trailing P/E. The markets already looked expensive before the virus outbreak but the sentiment now is undermined by a deteriorating outlook. According to Goldman Sachs’s forecast, the US market could face a 10% correction. Dow Jones has already fallen 5.3% from its recent peak.

Those who expect the virus to kick off a global recession might be disappointed, as the impact is likely to be temporary. Central banks around the globe are ready to inject liquidity and cut down interest rates to cushion the headwind. Covid-19 is proving to be less deadly than SARS, just more contagious.

Gold- Cash