The health crisis linked to the spread of the coronavirus outside China appears to pose a great risk to the global economy.

The effect of the coronavirus affected the oil market first, as Chinese demand for oil fell by 20% since Beijing's measures to limit the spread of the epidemic. China is the largest importer of oil since 2016, representing 15% of the global demand and nearly 40% of global growth. Consumption is currently estimated to be 3 million barrels per day less than normal.

More generally, the slowdown in the Chinese economy and the increase of cases of coronavirus-related contaminations in countries such as South Korea, Iran and Italy have had an impact on the world's financial markets.

The Dow Jones Industrial Average closed 1,031.61 points lower, or 3.56%, at 27,960.80 reporting its biggest point and percentage-point drop since February 2018. The Nasdaq slid 3.71% at 9,221.28 points and the S&P 500, which represents the 500 largest companies on Wall Street, closed 3.35% lower at 3,225.89 points.

Apple and Microsoft, for example, slid  4.90% and 4.86% respectively.

In this context, it is necessary to avoid the risk represented by equities, and to redirect towards assets that are considered safer, such as the foreign exchange market or the real estate market.

The real estate market is not affected by this new health crisis and will most certainly remain stable despite the current market drop.

Moreover, the S&P Corelogic Case-Shiller index of US property prices for December 2019 came out close to expectations. The 20-city index of the 20 major metropolitan areas rose by 0.4%, adjusted for seasonal variations and compared to the previous month, compared to +0.5% as a consensus. Excluding seasonal adjustments, this indicator was stable compared with November and up 2.9% year-on-year.

The Federal Housing Finance Agency (FHFA) index for house prices, which has also just been released, rose by 0.6% - against a consensus of +0.3% - compared with the previous month, after a gain of +0.3% in November.

The US Consumer Confidence Index for February 2020, measured by the Conference Board, came out at 130.7, compared to a revised downward level of 130.4 for January 2020. The consensus for February was 132.5.

Real estate is a distinct asset class that is simple to understand and can enhance the risk and return profile of an investor's portfolio. On its own, real estate offers competitive risk-adjusted returns, with attractive income streams. It can also enhance a portfolio by lowering volatility through diversification. Though illiquidity can be a concern for some investors, there are ways to gain exposure to real estate yet reduce illiquidity.

The U.S. real estate market is doing very well. BaltimoRealEstate LLC chose to invest on the U.S. real estate market (see our article ‘The reasons you should invest in the U.S. real estate market’). BaltimoRealEstate LLC acquires undervalued or distressed properties located in areas undergoing significant revitalization and urban redevelopment in the City of Baltimore.

For more information you can download our brochure or contact us, we will be happy to assist you.

Sources :

• https://www.cnbc.com/2020/02/25/us-health-officials-say-human-trials-on-coronavirus-vaccine-to-start-in-6-weeks.html
• https://www.boursier.com/indices/actualites/news/cloture-paris-le-cac40-s-enfonce-encore-de-pres-de-2-816132.html
• https://www.lesaffaires.com/bourse/revue-des-marches/bourse-ce-qui-bouge-avant-l-ouverture-lundi-24-fevrier-2020/616100
• https://www.barrons.com/articles/oil-drops-on-coronavirus-fears-51582561722