A Market Immune From Illness

Déjà vu? A week dominated by headlines of a spreading respiratory virus had investors recalling pandemics past, from SARS in 2003 to the Ebola scare six years ago. To discuss what the Wuhan virus could mean for markets, Dave Lafferty, chief market strategist at Natixis Investment Managers, and Ye Xie, a contributor to Bloomberg’s Markets Live blog, join the “What Goes Up” podcast.

Some highlights from Natixis’ Lafferty:

"There’s always sort of two phases: there’s the knee-jerk sort of risk-off, markets go down 1 percent, 2 percent, 3 percent, something like that, and then there’s a waiting period where we find out if it’s actually a more systemic problem. By and large in history, policy makers have gotten their arms around it, market tends to rally back."

"The thing that worries me is that there’s so much optimism priced in, and people are worried about valuation. But valuation, in and of itself, isn’t a catalyst. So in that vacuum, people tend to look for catalysts and maybe some type of epidemic or pandemic becomes the excuse they’ve been looking for to either profit-take or sell down assets that they think are expensive. So I don’t think it’s necessarily the thing that makes or breaks the market, but I would agree at these valuations, with the way the market has run, it does make for kind of a convenient excuse to take a little profit here."

Mentioned in this podcast:

‘Sharp and Short-Lived’: The Impact of Health Scares on Markets

Markets Upset From China Virus Is Only Getting Larger

Extreme Valuation Cases Wanted for a Red-Hot Rally in Equities

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