Finding value in fear
It is not every day that markets get caught out by overwhelming fear
The new coronavirus outbreak brings back many lessons in markets and one of them is to not be too blinded by the fear.
There is no doubt that things may still get worse before they get better, especially with the fact that the hectic travel period during the Chinese New Year holidays is yet to come.
But ultimately, it is all about trying to identify how bad things will really be. We're already seeing markets start to be a little more greedy over the past few hours - as compared to the pessimistic behaviour seen in trading yesterday.
US futures are up by ~0.5% while the Shanghai Composite index has erased gains of over 1% earlier to hit session highs now, keeping near flat levels on the day.
As with all such related fears and geopolitics, they will eventually pass at some point in time.
Instead, the real fear in all of this is whether or not the new coronavirus outbreak is going to have a more profound impact (longer-term) on markets. In this case, perhaps it may chip a little away at the Chinese economy this year.
However, unless this threatens to be develop into something like the SARS virus outbreak back in 2002-03 and plague markets with some element of uncertainty for a few months, expect markets to quickly move on from the pessimism here.
Sure, there may still be some days in the near-term that fear may creep back in.
But don't squint your eyes and cower in terror. Instead, open your eyes and look for value. Eventually, there will be a turning point and that's when fading the fear pays off.