• Marcus Brookes
  • 07 April 2020
  • 5 mins reading time

Over the past couple of days, there has been a fall in the number of new virus cases being recorded in New York and Europe. While this is a welcome development, we still think that there could be more unpleasant news regarding the virus and the consequences of the measures being taken to counter its spread.

Lower contagion rates

The recent optimism has been driven by a slowdown in the rate of new cases being recorded in Italy, Spain and New York. These are significant because the US, Spain and Italy have the highest total numbers of confirmed cases to date at 367,650, 136,675 and 132,547 respectively*. The number of new cases a day in Spain have been falling since 1 April, and in Italy since 26 March.

The US is a different case. President Trump played down the seriousness of the potential threat at first. While he did so, the number of cases across the US rose. New York was particularly badly hit with the total number of cases in the state of New York alone reaching 131,916 at the time of writing. As we’ve seen, that’s on a par with the whole of either Italy or Spain.

The New York State Governor, Andrew Cuomo, took unilateral action to implement restrictions on movement as well as passing state legislation designed to protect the most vulnerable citizens. This action, alongside that of fellow governors from both sides of the American political divide, appear to have slowed contagion where they have been applied.

Investor reaction

Aside from the measure of relief that this provides to health workers and citizens in general, it also has implications for people within my area of specialisation, that of investments.

Since the crisis took hold, global stock prices have fallen in the region of 25%. That has taken the overall value of the FTSE All Share index, for example, to its lowest point since 2012. The stock price rises over recent days have recovered the equivalent of four years’ worth of growth i.e. the index is now trading in line with 2016 values.

While investors tentatively move money back into higher-risk rated investments such as stocks, they are beginning to reduce their holdings of lower-risk rated ones such as government bonds. This is reflected in the modest drop in demand for and prices of government bonds in the US, UK and Germany.

The concern

There is an adage that stocks move up on rumour and down on fact. I think it worth keeping that adage in mind at the moment.

As I indicated earlier in this blog, some states in the US have reacted more robustly than others to the threat posed by Covid-19. It wasn’t until early April that the Wall Street Journal could start reporting “more than half” of the country’s states having imposed lockdown measures .

While it’s difficult to have absolute confidence in all the data that’s being reported, there appears to have been a correlation between the regions that have been slow to impose restrictions and those with higher rates of infection.

The concern I have is that the US might be another example of this. Even President Trump has adopted a more sombre approach to the pandemic in recent days. “There will be a lot of death unfortunately” was one of the phrases he used during a press conference at the White House on 4 April.


The priority is to protect people’s lives. The measures needed to achieve this have unpleasant but necessary short-term ramifications. These measures keep people in domestic confinement and place enormous stress on businesses. But the alternative is much worse.

For now, the data that I’m monitoring suggest that we need to keep doing the right things for the time being. In terms of investments, opportunities will present themselves, but I would not be surprised to see the recent rises come under pressure as the pandemic continues to take its toll.

Like everyone else, investors need to remain patient.

*Source:, accessed 7 April 2020

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