March 2, 2020 – Fears over the economic impacts of the coronavirus outbreak hammered markets last week. Evidence of supply chain disruptions, company-imposed travel restrictions, and news of the virus spreading outside of China served as a wake-up call to formerly complacent investors.

Massive liquidations ensued. It was among the worst weekly performances in U.S. equities’ history.

Precious metals markets were also hit hard. We saw forced selling in precious metals futures on Friday as traders there responded to margin calls. Others simply headed for the sidelines and sold metals along with everything else.

Despite the rush to the exits, the U.S. dollar performed poorly. Investors began pricing in rate cuts by the Federal Reserve. The DXY index closed sharply lower for the week.

Many expect central bankers will intervene quickly if confidence cannot be restored and markets continue in freefall. More central bank stimulus is not going to put inventory on store shelves or entice people to resume travel plans. That will happen only after fear surrounding the virus starts to abate.

It is not clear yet how serious the human toll of the virus will be. However, the associated supply chain disruptions and economic impacts do appear to be growing rapidly. Nike and Apple are, for example, both warning about supplies of their products drying up. Many large companies are canceling employee travel.



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