You may have been reading about how the coronavirus is causing a lot of ‘market turmoil’ and how “the market has currently priced in a lot of negative news”, according to at least one financial publication, Richard McCreery writes.

In fact, US and European stock markets hit record highs this week as it spread around the world, hitting international supply chains and in particular the Chinese economy which is the largest single contributor to global economic growth.

Whilst the overall impact is likely to be weaker global growth, nothing negative is priced in to stocks. Investors have shrugged off bad news and focused on the potential for more money printing from central banks. The announcement that China has cut tariffs on a range of imports was seen as positive but it also underlines how seriously the Chinese government is taking it, as their economy struggles to keep producing goods in the wake of emergency measures that have seen 50 million people quarantined.

Whilst the US economy is doing fine (data for jobs and productivity were good), it was announced that the French and Italian economies contracted in the final months of 2019. The French CAC 40 stock market index hit a 13-year high to celebrate this news. The German Dax stock market index hit an all-time high just as it was announced that German manufacturers had suffered their worst year for a decade. Never in the history of investing has so much bad news been so good for stocks.

Bloomberg offered the explanation that European investors are optimistic that “global growth is strong enough to weather the impact of the coronavirus”. This is the same global growth that has recently declined to a decade-low and seen global trade contract. The truth has far more to do with faith in unlimited money printing and, as the real economy slows, the financial markets bubble continues to inflate.

Richard McCreery is an investment adviser with over 20 years experience, based in the South of France. www.rmwm.jimdo.comRegulated in France by the Association Nationale des Conseils Financiers (ANACOFI), registration N° E004136. ORIAS member 13000050