The Coronavirus is raising questions…but is the market selloff overdone?

Energy Position Update as of March 10th 2020
March 11, 2020
April 27, 2020
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The Coronavirus is raising questions…but is the market selloff overdone?

The Coronavirus is raising questions…but is the market selloff overdone?

  • When will a Coronavirus vaccine be available?
  • Are we at risk of dwindling supplies of daily items?
  • How much will self-isolations slow down and affect the U.S. economy?
  • Will this virus send us into a recession (two negative GDP quarters in a row)?
  • How long will this Bear market last (down -20%+ from the Feb 19th, 2020 market high)?
  • When will oil prices rebound?

The answer to these questions is “We don’t know”, and because of this, we have seen a panic and a market dip unlike anything since Black Monday in October 1987.  How has this happened and is this panic selloff justified?

We do not presume to know if this selloff is warranted but here is something to consider…During the 2009 Swine Flu outbreak, from the time the first case was diagnosed on April 15th, 2009 until the first vaccine was released on October 5th, 2009 (six months), the S&P 500 went up 21.83%.  According to the website, the Swine Flu killed over 11,000 people in the US in 2009, seemingly much more severe than the 40 deaths caused by the Coronavirus as of March 12th, 2020!!!  So, what is so different about the Coronavirus?  Did our Biotech industry lose the ability to create vaccines?  No.  We see this selloff attributed more to the rise of social media, spreading both real and fake information, and this is flaming the panic we see today.

This is what Fluent Financial thinks about the Coronavirus outbreak:

  • We will get through this epidemic and be more prepared for the next virus outbreak simply because the alternative to not getting through it is unthinkable, unimaginable, and unacceptable.
    • As Americans, when times get tough, we don’t just roll over and take it…we fight back, find solutions and create systems to make us better prepared for the next unknown.
    • The U.S. free market is better prepared than any other country to handle an outbreak and create a solution to a problem like the Coronavirus…we are the primary drug researchers and developers for a world that relies on our Biotech companies for solutions and have the best and brightest working on a vaccine.
  • You will keep using your cell phones (Technology), temperature controlling your homes (Utilities), cleaning your homes (Materials/Chemicals), brushing your teeth (Consumer Staples), relying on some sort of transportation (Energy), seeing your Doctor and getting prescriptions (Health Care) and using your bank to pay bills (Finance), all while the U.S. defense companies stand ready to protect our way of life (Industrial).
  • The current pain we are seeing in the markets is very different than the 2008 housing crisis that had underlying financial issues…The Coronavirus is a medical issue, not a financial issue.
  • Companies with stable balance sheets can be purchased at a discount from their historic valuations and are presenting some of the best buying opportunities in years.

Ask yourself this…if a vaccine for Coronavirus comes out tomorrow, how long will it take before concert venues, sporting events, restaurants, and travel return to normal?

The U.S. is the most capable country in the world for dealing with a Pandemic outbreak so don’t be surprised when you wake up one day soon and see the country, and the markets, returning to normal.

Do you think Warren Buffet is a buyer or a seller in this market?

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