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Assessing The Unknowns As Coronavirus Spreads

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  • Aggressive measures, including quarantine, have had a significant impact on growth in China.
  • Before the advent of the virus, the global economy was expected to be in an extended cycle, with growth improving mildly in 2020.
  • Markets are expecting the Federal Reserve to cut rates, and central banks should be willing to add liquidity to stabilize growth and markets.

By Rob Waldner, Chief Strategist and Head of Macro Research, Invesco Fixed Income

Invesco Fixed Income is focused on how COVID-19 could impact individual issuers differently

Developments in the last week have made it clear that the spread of the COVID-19 coronavirus is unlikely to be contained and that it is something the world will likely have to deal with on an ongoing basis. Unfortunately, there are still many unknowns about the virus including how it spreads, what the fatality rate will prove to be, and whether scientists will be able to control it somewhat in the near future through improved treatment or a vaccine. This uncertainty is beginning to change people's behavior and is having an impact on the markets.

The spread of this virus is first of all a humanitarian issue, but for the balance of this note we will discuss the economic and market impact of the spread.

Work in China begins to resume

Until recently the biggest impact of COVID-19 had been seen in China, where the virus originated. Most infections and fatalities have been in China, and the country has taken aggressive measures to contain the spread of the virus. These aggressive measures, including quarantine, have had a significant impact on growth in China, which has essentially stalled in the first quarter of this year, and global growth has been slowing sharply as a result. China is now returning to work as policymakers have started to prioritize supporting the economy. Growth is running well below pre-virus levels at this point, but it is on an improving trend currently.

The spread of the virus broadly beyond China will now begin to impact global growth more substantially as containment measures impede economic activity, and fear and uncertainty impact risk-taking. At this stage it is difficult to quantify the impact

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Invesco is an independent investment management firm dedicated to delivering an investment experience that helps people get more out of life.Be the first to know! Sign up for Invesco US Blog and get expert investment views as they post.Disclosure for all Invesco US articles: Before investing, carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE All data provided by Invesco unless otherwise noted. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.’s retail products and collective trust funds. Invesco Advisers, Inc. and other affiliated investment advisers mentioned provide investment advisory services and do not sell securities. Invesco Unit Investment Trusts are distributed by the sponsor, Invesco Capital Markets, Inc., and broker-dealers including Invesco Distributors, Inc. PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC (Invesco PowerShares). Each entity is an indirect, wholly owned subsidiary of Invesco Ltd. ©2015 Invesco Ltd. All rights reserved.

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