The long-range view in the financial markets is not quite so crystal clear as it is in the mountains. Since visibility is poor, volatility is heightened. The reason for this is the lack of clarity over the duration and extent of the growth slowdown caused by the spread of coronavirus. In our last Market Comment, we estimated an impact of some -0.5% to -1.5% for Chinese economic growth compared to the previous year, depending on the duration of the problem and for the global GDP growth by around -0.25% to -0.5%. Due to the lack of a clearer long-term picture, it is perhaps not a bad idea right now to retain a more defensive stance with reduced volatility, at least until the fog starts to clear in the markets. We are continuing to overweight investment-grade bonds in preference to high-yield bonds, along with a slight dollar overweighting on the currency front, a regional overweighting of US equities and a strong overweighting of equities with below-average volatility.

The spread of the coronavirus that originated in China is dominating the headlines. Although equity markets have improved, its impact should not be underestimated. While China‘s economy and stock market have bounced back from reverses in 2003, a comparison with SARS 17 years ago is hardly valid, as China is now around four times as important to the global economy as it was back then. Furthermore, the measures taken by China will have greater repercussions this time for the global and above all the Chinese economy. And finally, China‘s share of the business done by numerous major Western companies is also incomparably greater than it was 17 years ago. 

The turbulent performance of Bitcoin over the last year has brought this cryptocurrency to the attention of the wider public. But this currency has actually been around for almost ten years, and an estimated 1,600 other alternative currencies have also sprung up in the meantime. The question is often asked whether these constructs – which only exist in the form of digital code – can really be considered currencies at all in a way that bears comparison with the dollar, euro or yen. We will return to this question later in this article. First of all it is worth establishing what actually lies behind cryptocurrencies such as Bitcoin, Ether and Ripple.