The coronavirus has been making investors sick with volatility in the past trading week. The effects of the virus are in their early stages, but historical data shows that markets have been relatively immune to diseases in years past.
Of course, that’s not to say they don’t have any impact whatsoever, especially given the past week of trading.
“Epidemics and pandemics do have market consequences and raise risk, and…they can be deadly,” wrote David Kotok, chairman and CIO at money manager Cumberland Advisors, in a research note–based on a MarketWatch report. “External shocks can derail economic trends and abruptly alter market sentiment. Not all risk is economic policy or monetary.”
According to data from Dow Jones on 12 epidemics, the markets have taken a hit only once in a 6-month period and twice during a 12-month period based on changes in the S&P 500. The largest drop came within a 12-month period back in 1981 when HIV/AIDS rattled the markets–the S&P 500 fell 10.73%.
The coronavirus has been compared to SARS in terms of its impact and origination and experts feel the effects should be short-lived on the markets.
“If we use the SARS epidemic as a guide, however, any economic impact from the current coronavirus is likely to be temporary,” the Wells analysts said.
Trading a Healthy U.S. Equities Market
Despite the fears of the coronavirus, the healthy U.S. market environment creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).
- Seeks investment results, before fees and expenses, that track the Russell 1000®/FTSE All-World ex-US 150/50 Net Spread Index (the “index”).
- The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of ETFs on the Long Component of the index.
- The index measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Index (the “Long Component”) and 50% short exposure to the FTSE All-World ex-US Index (the “Short Component”).
Investors looking to play the other side can use the Direxion FTSE International Over US ETF (NYSEArca: RWIU) to capitalize on international equities will outdoing U.S. equities. RWIU seeks investment results, before fees and expenses, that track the FTSE All-World ex-US/Russell 1000 150/50 Net Spread Index, which measures the performance of a portfolio that has 150 percent long exposure to the FTSE All-World ex-US Index and 50 percent short exposure to the Russell 1000® Index.
For more market trends, visit ETF Trends.