The ripple effects of the coronavirus outbreak reverberated worldwide, with investors becoming increasingly concerned about the epidemic’s impact on global economic growth. Stocks fell and volatility rose, after the World Health Organization declared the outbreak an international health emergency last week. The latest chart of global volatility hotspots was littered with upward arrows, reflecting sharp increases in volatility at the individual country level. Axioma’s Worldwide short-horizon fundamental model showed that volatility rose more than one percentage point last week, particularly for countries in Europe and Asia.
Top-line risk rose much more for emerging markets than for developed markets. Over the past week, the short-horizon risk forecast rose 140 basis points for FTSE Emerging Markets and only 40 basis points for Developed Markets (up 10% and 4%, respectively), as measured by Axioma’s short-horizon fundamental Emerging Markets and Worldwide models, respectively.
See graph from the Equity Risk Monitors as of 30 January 2020: