Stefano Sciacca

Fri, Feb 21

Rising Safe-Heavens, Uncertainties Persist

With the Coronavirus registering 76,802 (Cases) - 2,250 (Deaths) - 18,822 (Recovered), these are the numbers that everyone seems to be keeping under the spotlight. Whilst the number of infected people is starting to show signs of deceleration (see chart below), the deaths count continues to edge higher as we surpass the 2000 level. 



The capital markets are of course positioning accordingly, and they are highlighting “mixed” signals. One day equities are rallying, gold follows and yields spike, another day equities sharply decline (yesterday the SP500 plunged more than 1% intraday), gold continues to hike, and yields fall. It is all a bit confusing, it seems like active market participants do not really know where to position themselves in order not to be overly exposed to the Virus updates (few large companies across different sectors are already profit-warning for Q1 2020), but also the challenge is to not “miss out” on any upside potential (tech companies continues to thrive, whilst Q4 earnings season and global macro data seem to strengthen a deteriorating global growth outlook). 


What appeared to be a clear pattern is the inevitable growth in price of gold which definitely came out as the “preferred” asset for the equity outflows. Bitcoin, for many the new “digital gold”, also is having the best YTD performance (+36% vs 4.5% for SP500 & 7.8% for Gold) following the 2019 bear market. 


Volatility is also back. That is the main “positive” news. Banks will benefit from larger trading volumes and, in general, more frequent trading activity. The Volatility Index, which tracks the implied volatility of the 500 constituents within the SP500, has finally recovered from the bottom level of roughly 12 to the YTD high of 20. Moving forward, it may not be surprising if gold perhaps struggled at the $1600 per ounce level and the SPX reached a new all-time-high in the next month. 


Long-term, it could be expected that the virus aftermath could start hitting the “real economy” between Q1 and Q2, meaning a deteriorating consensus from brokers and lower guidance (Profits, Cash-Flows and Dividend especially) for companies. If equity investors feel disappointed due to lower-than-expected cash returned to shareholders in forms of dividends or buybacks, then we will likely see a bearish sentiment spreading out. 


Elections in the US, UK-EU deals, US-China Trade negotiations and other geopolitical uncertainties (Iran?) continue to feed extra caution for this year.



Next week our macro spotlight will be on?




  • Ifo Business Climate – Germany 
  • Dallas Manufacturing Index - US 





  • GDP Growth – Germany 
  • House Price Index – US 
  • Richmond Fed Manufacturing Index - US 




  • New Home Sales - US 




  • Business Confidence – Eurozone 
  • Housing Prices – UK 
  • GDP Growth – US 
  • Durable Goods – US 
  • Unemployment Rate – Japan 
  • Retail Sales – Japan 
  • Industrial Production - Japan




  • Gfk Consumer Confidence – UK 
  • GDP Growth – France 
  • Unemployment Rate – Germany 
  • Inflation Rate – Eurozone 
  • Chicago PMI – US 
  • Michigan Consumer Sentiment – US 
  • Personal Spending/Income - US 


Chart of the week



Fact of the week


A.P. Moller-Maersk, the largest container shipping company worldwide, announced a significant impact on its FY2020 guidance as demand might see a “sharp” rebound due to the COVID19. They now expect a weaker start of the year.


Quote of the week


“Apple's iPhone sales in China could fall 40-50% in February and March due to the coronavirus outbreak”

——Global Times