Covid-19: Keep despair in check! But risks will still remain high

JOHANNESBURG – The Covid-19 virus, initially known as the coronavirus, has pushed local and global equity investors to the edge. Using Barry Ritholz’s scale of investor emotions, we find ourselves at the anxiety level and the up-trend of developed market equities since the end of the 2008/09 global financial crisis is severely threatened.

A break in the up-trend is likely to lead to fear and panic as a major sell-off and a bear market could be in the offing. But will it?

The effective lockdown of factories in China saw exports shrink in January and February by more than 17percent in US dollar terms, while imports declined by four percent.

In addition, IHS Markit reported that supply chain issues saw the global economy in February slump at its steepest rate since 2009, with both the global purchasing managers’ indexes (PMI) of services and manufacturing sectors falling below 50points, indicating contraction in the global economy.

Inventory holdings and stocks of finished goods plummeted and even our own retailers warned of empty shelves of goods imported from China in coming months.