SAMT Blog
Virus and financial markets
01. February 2020, by Mario V. Guffanti
Technical Analysis
The Chinese coronavirus has now massively dominated all the world’s media. But the news that arrives is not always considered reliable and there is a certain confusion that is not good for investors. One of the assumptions of the technical analysis is that all the information is contained in the price and therefore, regardless of what you read in the newspapers or see on television, the analysis of a chart can give us good information on how buyers and sellers are really reacting within the financial markets.
One of the exercises that technical analysts are used to do in the case of extraordinary events, is to check if there have been similar cases in the past, and study how the market had behaved in order to have a reference track from where to start.
in China, in the period 2002-2003, we had a very similar contagion event caused by the Sars virus.
Eighteen years have now passed and in the meantime the world has profoundly changed, but some correlation mechanisms in financial markets and economic activities have remained the same. The main impact of this type of event starts in the transport and tourism sectors and then spreads to the rest of the stock markets as the crisis gets longer. Among the most affected commodities is the price of oil as it is directly related to the travel, tourism and transport sectors. The financial...
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