Not just any dip: Is the coronavirus a buying opportunity or a falling knife?

The Dow Jones Industrial Average started the week by dropping about 1,000 points on Monday.

Then on Tuesday, it did it again.

For institutional investors grappling with such fully valued equity markets, a dip like this could represent a buying opportunity. But should they go for it?

The coronavirus — worries over its further spread, which could lead to an extended period of slower global growth — appears to be the geopolitical event that’s finally caught traders’ attention, bucking the almost nihilistic attitude underpinning the longest bull market in history.

Read: Should investors keep calm and carry on in the face of the coronavirus?

Most of that downward momentum was before the U.S. Center for Disease Control announced on Tuesday that it’s inevitable the virus will spread further into the U.S. “It’s not so much a question of if this will happen any more, but rather more a question of exactly when this will happen and how many people in this country will have severe illness,” said Nancy Messonnier, head of the CDC, in a media briefing on Tuesday.

In China, reports appear to show the rise in cases is slowing down, but new ones are being reported, predominantly in Iran, Italy, Japan and South Korea.

However, Salman Baig, senior vice-president and portfolio manager at Unigestion, believes the virus won’t be putting pressure on markets for much longer. “While we do not intend to understate the impact of the COVID-19 virus on the global economy and on the lives of those affected, we do believe at this stage the virus will be short-lived rather than a fundamental shift when looking beyond the next few weeks,” he said in a macro-views note. “In light of this, we see a sovereign bond market that has rallied on virus fears, but now faces headwinds on the horizon.”

Read: Will emerging Asia outperform against an improving global backdrop?

But it’s difficult to measure the impact of a developing scenario like the virus, he said. Looking to its impact on the U.S., he noted one worrying metric was the fall in U.S. manufacturing purchasing managers index on Feb. 21.

As money managers grit their teeth, many are eyeing the U.S. Federal Reserve to see whether it might respond by cutting rates.

“We are closely monitoring the emergence of the coronavirus, which is likely to have a noticeable impact on Chinese growth, at least in the first quarter of this year,” said Richard Clarida, the Fed’s vice-chair, in a speech on Tuesday. “The disruption there could spill over to the rest of the global economy. But it is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook.”

While Wednesday’s trading offered a less dramatically grim view than the previous two days, the correlation between international markets is clear. Whether watching Toronto’s TSX/S&P composite, Germany’s DAX index or Japan’s Nikkei, stocks fell off a cliff in tandem early in the week and kept rolling downhill, with a firm up on Wednesday.

Read: Technology, consumers driving emerging market equities

Overall, the sell-off isn’t a surprise nor is it necessarily fear-based, says Dec Mullarkey, managing director of investment strategy at SLC Management. Equity markets have been using the 2003 severe acute respiratory syndrome outbreak as a playbook for the coronavirus situation. Back then, he says, equity markets didn’t see much bluster over the disease, but it’s key to remember China wasn’t the economic powerhouse it is today.

“China’s obviously the second-largest economy in the world now. Back then it was just beginning to enter the World Trade Organization. It was a fledgling emerging market and supply chains were kind of non-existent or very rudimentary.”

However, while the correlation between markets is remarkable, this week’s price-action wasn’t unreasonable, he adds. “I actually thought the sell-off was a rational reaction to what was going on. I base that on the fact that when you actually dig into the numbers, you didn’t see an overreaction. You saw sectors getting repriced that deservedly needed to given the stress we have going on, be it airlines, the hotel industry, cruises. All of those got repriced. And then when you look at companies that have direct exposure, [Apple Inc.] is one that jumps out, that gets repriced.”

Institutional investors watching the events of this week are eager to know whether markets have bottomed here or whether there’s more selling to come, says Mullarkey, but it’s likely they won’t get the answers until at least the end of the first quarter.

Read: What China’s inclusion on a major emerging market index means for pension plans