Over the past few days, markets became increasingly concerned with the news that total coronavirus cases outside of China significantly increased. If the outbreak can be contained this spring, the current expectation is that there would be a subsequent recovery to offset the current economic pain that is expected in the first quarter in China and globally. The most recent leading economic indicators in the U.S. and also manufacturing data outside the U.S. had been improving through January, so it has been the expectation that the coronavirus should only delay what was an improving global economic backdrop.
However, if the containment period goes beyond spring, the potential impact on supply chains and earnings is uncertain at this point. Markets are certainly pricing in more bad news at this time. Although the base case is still for an economic recovery in the next quarter or two, we acknowledge the situation is fluid. One of the key indicators we are watching is the strength of the U.S. consumer, which has been very resilient the last few years, and the potential impact of the virus on U.S. consumer demand. While we are not recommending any immediate allocation changes, we continue to monitor the trajectory of the virus and economic impact and will update you on our perspective of potential allocation changes. If you would like to discuss your specific circumstance further please reach out to us.
Disclosures: The information reflects Homrich Berg’s views, opinions and analyses as of February 25, 2020. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters. Certain of the information herein is based on third party sources believed to be reliable but which have not been independently verified. Past performance is not a guarantee or indicator of future results; inherent in any investment is the risk of loss.