Equities reversed their recent gains last week on the uncertainty created by the coronavirus. The human and economic impact of the virus is still very much unknown and will likely become worse before getting better. Emerging market stocks and oil are seeing the biggest declines in price and that will likely continue this week. Treasury bonds have been well bid in a flight to quality, with the 10-year Treasury closing in on a 1.6% yield. Markets don’t like uncertainty and volatility is likely to remain elevated until the extent of the impact is better understood.
This week’s Federal Reserve (Fed) meeting and busy earnings schedule will likely be overshadowed by the impact of the virus. I don’t expect any surprises from the Fed, as they will not likely make any major policy shifts unless the economy slows significantly.
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