Via the excellent Damien Boey at Credit Suisse:
A belated happy new year! Event-wise, it has not been a great start to 2020, but hopefully we can navigate the risks effectively together.
In early January, we have seen Middle Eastern tensions, natural disasters and the Wuhan coronavirus dominate the headlines. The signing of phase I of the US-China trade deal has been treated largely as old news by investors. Recently, there have been a plethora of articles written about the coronavirus, and its potential economic impact. Serious stuff, to be sure. But we have previously suggested that the biggest issue for financial markets in 2020 is the risk of volatility rising. As far as investors are concerned, and without diminishing the humanitarian significance of the coronavirus, the real virus has been in volatility. More specifically, central bank suppression of volatility has lifted asset prices, but severely impaired conventional factor investing. For further discussion, please see our 2020 outlook piece dated 29 November 2019.
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