(Market has Corona Hangover)


Real numbers being released in China started a risk of attitude in the market. Following this news broke that South Korea had new cases which has now jumped to 1,146 cases and 11 deaths. A U.S. soldier stationed in South Korea has tested positive. Also, Iran reported infections which are the highest death toll outside of China. In Europe, several countries have announced their first Coronavirus cases, with all appearing to be linked to the growing outbreak in Italy. Austria, Croatia Switzerland said the cases involved people who had been to Italy, as did Algeria and Africa. The first positive virus test has been recorded in Latin American, a Brazilian who just returned from Italy. Italy now has 300 cases and 11 deaths. This news crashed Wall Streets’ bull market party.

Monday and Tuesday, the market fell nearly 7% in total with the S&P500 lost an estimated $1.737 trillion value in two days. Riskier assets are being fled amid intense fears over a possible global slowdown over the deadly Coronavirus. The two-day loss was the largest since August of 2015. This also saw the 10-year Treasury note fell to a record low of 1.32%. Health officials at the Center for Disease Control stated it was “likely” to continue to spread throughout the United States and the American public should “prepare for the expectation that is going to be bad.”

It is clear that investors are clearly expecting more bad news and rather than wait for it to come, they are selling now to keep the powder dry. Signs were evident that electronics and the auto industries that the slowdown is already happening, which will be a drag on growth. Investors have raced into bonds for safety. Early this year, I discussed SARS and this same pattern possibly happening. The market should reverse once news breaks that the virus has been contained. For now, though, it appears to have turned into a Pandemic. The next resistance level is around 3,000 for the S&P500. Once it breaks through that, the next level is 2850.

Hopefully, you are prepared and have taken my warnings to rebalance and take profits, followed by parking some of it in bonds, other safe havens or negatively correlated positions. Keep to your game plan here and don’t get emotional. Rotate your dry power and profits back into key positions at the prices you have identified. Those prices should be sale prices and it may be too early to do so right now. That’s okay. Wait. Let the market come to you.

As you may or may not know, after a long party, a hangover takes time to go away and it usually gets worse before it gets better. I always enjoy being the one without a hangover and having a productive day while the suffering is going on.

If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendation and opinion.

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC. For questions or investment topics please email me [email protected].

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