Corona Crash - The US Wakes Up to a New Reality

16 thg 3, 2020

March 16th, 2020 - Pre Market Open Update

Corona Crash - The US Wakes Up to a New Reality

With lockdowns and quarantining spreading across the globe as quickly as COVID 19 there will undoubtedly be a severe economic impact as wealth as an impact on our society. With high profile sports stars, politicians and actors contracting the virus, the new reality is setting in.

I believe this will be the most volatile stock market crash in history.  Panic and fear are gripping the globe and certain industries such as travel, leisure, sports, and events will all be severely impacted. Typically tourism and dining contribute to about 5% of GDP according to the Economist Magazine, so this might mean we drift into a technical recession this year, but it will hopefully be short-lived.

There is strong evidence that China is already bouncing back with the CSI 300 only registering a 5% loss in 2020 compared to the other major indices losing at least 20% so far.

The good news is that central banks and governments are reacting economically very well slashing interest rates and creating emergency response budgets to help keep businesses afloat.

The bad news is that the US response to testing and quarantine is too slow and the weaknesses of the US healthcare system are seriously exposed, which will prolong the economic impact of the virus.

This may be the most volatile crash in history, but it may also be the most short-lived and quickest recovery.  It depends on the speed to deliver and deploy a vaccine, so we can all resume our normal routines again.

Systemically, we are OK, goods are still flowing, and there are no large job losses announced so far.  As long as governments support the businesses and those who are suffering we should hopefully come out the other side relatively unscathed.

Market Outlook.

A previously mentioned, I set 4 targets for the S&P 500 crash.

Target 1: Break of the 2019 Bull Run Support - Achieved
Target 2:  Break of the 2008 Bull Run Support - Achieved
Target 3: Retrace to 2014 Stock Market High at 2140 points - In Progress
Target 4: Deep Value Zone - This is where we move down to the 2000 and 2008 stock market peaks.


I think we will not break through Target 4 support IF we manage to deploy the vaccine and support our businesses against mass redundancies and bankruptcy.

And that is a big IF!