Things began to look positive on Tuesday as Trump mentioned the possibility of a payroll tax cut, which boosted investor confidence opening the Dow 900 points higher. However, today has looked all too familiar as the markets respond to the the coronavirus being labelled as a pandemic by WHO. This is the last thing investors needed to hear as we begin to slowly move our economies into recession territory. It seems our markets and investor confidence has failed us, and with so much negative news it remains hard to find any incentive to buy shares. If anything WHO is using this pandemic effect to try push Governments into taking more drastic measures to contain the virus.
— World Health Organization (WHO) (@WHO) March 11, 2020
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
You will see in every media article the same coverage of the infection tally and death toll of the virus. Instead of distilling fear for viewers, we want to give you the resources and information so that you are prepared for any market scenario.
- Short term Bearish response – Next few days look grim for the US and Australian markets as news of the pandemic label has only dropped today. The next few days look pretty short, as many investors will have no incentive to buy unless they are looking for a long term investment.
- Possibly the worst Friday of trading coming – with so much uncertainty and media pushing this pandemic label across the globe, more investors are likely to ditch their holdings, as short term investors do not want weekend news to impact their stock.
- The good news is that this is all temporary – in 2 weeks most people will forget that we entered a Pandemic level crisis as people become bored of hearing the same stories and the media will be forced away from covering negative reports on the virus.
- The next few weeks will really determine how big this crisis will be. Most countries are very aware of the virus, and within the next few months we should see a decline in cases as countries contain the spread.
“In the past two weeks the number of cases outside China has increased thirteen fold and the number of affected countries has tripled,” WHO Director Dr. Tedros Adhanom Ghebreyesus
This of course is a huge problem, however it should not be impacting the markets the way it currently is. With Governments prepared to inject the economy when the time comes, I find it hard to see Australia entering two quarters of negative GDP (recession). We have seen the Australian economy enter negative GDP in quarters at a time and yet have still not faced a recession in a very long time.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group.