Coronavirus stock market ‘bounce back’ matches those seen after SARS, Swine Flue and MERS outbreaks, more volatility to come?

  • 33% of UK retail investors expect a stock market bounce back to January levels in 2020
  • 35% think it will happen in 2021, and 9% think it will take longer than this

ETF provider GraniteShares says that while many investors believe the recent recovery in stock markets could be built on shaky foundations, the bounce back is similar to those seen in the wake of previous pandemics.  Its analysis of the FTSE 100 during the SARS, Swine Flu and MERS crises reveals bounce backs of 21.8%, 25.8% and 16.9% respectively.  From its low on 23 March, the FTSE-100 had risen by 24.5% by the close on 28 May.

New research from GraniteShares reveals 33% of UK retail investors believe a stock market bounce back to levels seen in January this year (it reached 7,674 on 17thJanuary) will happen in 2020.  Some 16% predict it will take place in Q1 2021, and 19% think it will happen between Q2 and Q4 2021.  Worryingly, 6% think we will have to wait until 2022 for a return to the January 2020 level, and 3% think it will take longer than this to happen.  Some 19% say they don’t know when it will happen, and 3% don’t expect one at all.     

Viruses and the marketsCrisis point – FTSE 100(date)Bounce back – FTSE 100 (date)Percentage gain
SARS3684.7 (3rd March 2003)4489.7 (2nd April 2004)21.8%
Swine Flu4125 (2ndApril 2009)5190.7 (30thNovember 2009)25.8%
MERS5758.4 (3rdSeptember 2012)6731.3 (30THDecember 2013)16.9%
Coronavirus4993.9 (23rdMarch 2020)6218.8 (28th May 2020)24.5%

Will Rhind, Founder and CEO at GraniteShares told B365:“The coronavirus and associated lockdown have meant that investors have endured a torrid time with billions of pounds being wiped off the FTSE 100.   Sentiment has clearly changed in recent weeks as investors look to the easing of the lockdown and news around the development of a vaccine.  It is probably safe to assume that it won’t be a smooth path, not only are there difficulties in restarting economies but because of other factors like US-China tensions. 

 “If market volatility does remain elevated, sophisticated investors have a growing range of strategies and products that they can use to benefit from stock market falls, or enhance returns when they rise.  For example, we have 11 single stock FTSE 100 three times short and 11 three times long Exchange Traded Products (ETPs) listed on the London Stock Exchange.”

 In November last year, GraniteShares listed a range of short and leveraged single stock daily Exchange Traded Products (ETPs) on the London Stock Exchange, enabling for the first-time sophisticated investors to take positions on both rising and falling share prices.In addition to this, they can also be used to hedge individual stock exposures, including those in index or fund holdings. By providing transparent access through an ETP, GraniteShares is removing the barriers that sophisticated investors face if they want to use leverage. 

GraniteShares daily ETPs provide long and short exposure to a selection of major companies listed on the London Stock Exchange.

GraniteShares ETPs

Underlying stock+3x Long-3x Short
Lloyds Banking Group3LLL3SLL
Rio Tinto3LRI3SRI
Royal Dutch Shell3LRD3SRD