Thought of the week: Corona Panic

Financial Chipmunk Corona Panic

What a week it is! And it’s only Thursday! In this series I will share my thoughts about a variety of topics that grabbed my attention. This week, Corona and the stock market!

Corona Panic

None of you have probably missed the stock market correction that’s currently going on. What a slide it is. The S&P 500 is down 8% already. What will the rest of this week bring?

A story by Market Watch indicates nothing good… Based on their research this kind of sell-off happens only once every 2 years, on average.

Their research also indicated that this kind of sell-off will most likely be followed by a lot more unrest.

The reason for this is simple. Mr. Market does not like is uncertainty. There is probably nothing more uncertain than a virus that results in a pandemic. The more the virus spreads, so does the ‘panic’. This all results in stock market volatility and thus, opportunity.

What to expect?

The economic effects of the Corona virus are becoming more and more visible. A good example of this is me looking to buy solar panels for my new home. The solar panel I want has already a expected shipping delay of several months. All because of Corona.

In my view, the negative economic effects will be larger than the market currently expects. In part, because of the lack of transparency of China. The markets feel that the supply chain in and from China is slowing down, but nobody knows for sure by how much.

In several earning calls of the past weeks, Corona is a key topic. But follow-up questions regarding the impact on future earnings receive a vague reply. Companies just don’t know.

The number of cases of the Corona outbreak in China are slowing down. However, globally, the outbreak has just only begun. Sciencemag considers Corona even ‘unstoppable‘ for now.

Imagine what would happen if not only the economic machine in China were to slow down significantly, but of Europe and the US as well? Will this be the end of the 11 year bull run?

Relax, but be cautious

Yes, it may seem the end of the world, but the same as with Ebola and SARS, this will pass. It’s terrible for those affected but one day Corona will be over.

I’m very lucky that I live in The Netherlands and the Corona virus has not (yet) arrived. Let’s just hope we keep it that way and that this virus is contained globally as soon as possible.

In the meanwhile, from a stock market perspective, I’m not changing the portfolio of my kids even a bit. Just look at your investment portfolio from a long-term perspective. However, do make sure that you keep your eyes out for good investment opportunities!

Keep safe!

To my readers, what’s your view on the Corona virus? Hope you are all safe?

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