“We can imagine the effects of the coronavirus pandemic as distributed in three concentric circles”. Alessandro Fugnoli, Kairos strategist, says it in the latest episode of the video column "On the fourth floor".
“The first circle is central China – explains the analyst – where the social and economic damages are very serious and will continue at least for the entire first half of the year”.
The second “is China as a whole – continues Fugnoli – where the human damages are much more contained, but the economic damage they are still relevant, because the shock is both on the supply and on the demand side”.
The third circle “is the rest of the world, where the human effects are not relevant for the moment, while the economic ones mainly concern the breakdown of some production chains, given that many components arrive from China and there are obviously delays, which we will notice in the coming months".
Another general consequence of the coronavirus pandemic “is the fall in raw material pricesand that China imports more, starting with oil – underlines the Kairos strategist again – For the rest, the effects should be considered limited”.
As for the countermeasures put in place so far, Fugnoli notes that "the Chinese monetary authorities responded promptly, stabilizing Asian financial markets and encouraging an even more expansionary attitude from other central banks”.
In this context, which strategy would you recommend to investors? According to the expert, the psychological aspects must be taken into consideration. On the markets there is the awareness that "the authorities of the whole world will be available to provide aid both on the monetary and on the fiscal level", therefore the operators "seem to have already left behind the problem of the coronavirus and psychologically they are even poised to reach new highs relatively quickly.”
Consequently, the suggestion is to “don't give in to pessimism and stay constructive”, while maintaining “caution for at least two to three weeks”, without “exaggerating in the desire to take advantage of the drop in prices recorded recently”.
The reason? Simple: "We are still not sure if the pandemic has been contained and therefore we cannot know if the effects in the rest of the world will really be zero ”.
