We had major stock market gains prior to this that provided a good amount of cushion to absorb the worst drops. Perhaps that makes it look worse, but so far there is still enough capital in the market that we're above the highs of 4-5 years ago.
Think about this:
- What industries are actually shut down? Tourism, travel, etc.?
- Whose workplaces have actually ceased all operations? Restaurants?
- So I ask... Do those places, if shuttered for 8-15% of the year make up 30% of our GDP or total market cap for the year?
- Do they even make up a corresponding 8-15%? Maybe the worst is still "yet to come", but I'm still waiting for the doom and gloom China supply chain issues to crop up.
- "Parcel volume fell 2.4% among manufacturing customers in February 2020 compared to a year ago"
- "Overall, roughly 20% of U.S. retailers’ supply chains are exposed to China"
- So roughly 0.5% of our overall supply chain has disappeared for a couple months?
- Travel and Tourism makes up 8-9% of our annual GDP - so assuming a closure on those services for 60 days, that's 1.3% of our annual GDP gone.
I'm not seeing where these sectors add up to justify a 30% drop in the markets or a pending recession. People losing their jobs and a strain on small business can make this worse, but it's panic selling and we're simultaneously completing a large retracement after a huge bull run.
Sources
- CNBC: https://bit.ly/2TUBcwD
- Tourism and Travel: https://bit.ly/2Qo6cD4
- US GDP (~$21T): https://en.wikipedia.org/wiki/Economy_of_the_United_States
This is a manufactured crisis. The Powers That Be have given the orders to quarantine and sell to cause panic and bring down the market. This could be the final battle for control of the world between the Globalist elite and the Nationalists. The question is, will the black hats or the white hats win? Nobody knows the answer. I have read good theories for both sides. Time will tell.
Good thing we won't be. Also, not to get dark, but the most affected demographic isn't the foundation of the economy. Though, they're more likely to have large investments and would probably make sudden moves regarding an investment income they currently rely on, so maybe that's the answer to my own question.
Obligatory "I am not a licensed stock market adviser" but:
I think a lot of the market runs more on emotion rather than hard numbers and facts. When the market is going good, people buy in and drive up prices higher than what the business numbers really justify. When something goes wrong, people panic sell and drive prices lower than what the numbers say.
Me personally, I'm buying oil and oil/gas related stocks now (BP, RDS, EPD, etc). I think they'll take a couple years to come back after Russia and the Saudi's finish their pissing contest, but I'm pretty sure they'll come back. I plan on buying airline stocks in the next few weeks assuming prices stay as low as they are now then buying cruise line stock (specifically RCL) a couple months from now.
I think when this blows over, this will wind up being the "once in a generation" buying opportunity that people will be kicking themselves for not getting in on.
Airline stocks could make a lot of sense, especially after a quick look at that tourism and travel chart that expects a 53% expansion 2018-2028. Prices are being reset to 2015 levels. Assuming the market pans out that way (lol who knows), that's a decent increase over the next 8 years.
"What is imagined can become real." Keep in mind that stock market gains and losses are based in part on the market's perception of any given company, rather than their ability to do business. Also read Nobel House. Just a novel about international intrigue and stock market manipulation. A very scary novel if you read it while watching how the current Kung Flu economic situation is being handled. I first read it in 2008 during the housing crisis.
This is all bs! Numbers in the OP are valid. This too shall pass.
My main concern is the ripple effect. Look, for example at the housing crisis. Affected 1 industry but hit us all.
The problem I see with the current situation is that for each group you described, we are talking serious wider effects. Restaurants do not operate with huge margins. What happens if they go belly up in mass? We have a lot of people on the service industry. Trump essentially said yesterday we would be looking at an airline bailout. And think about the number of employees affected that are living paycheck to paycheck.
Every week this goes by multiplies long-term effects, and raises the chances we see recession. People in this country are manufacturing a recession.
This is a fair concern and it's easy to see this as a possibility, but I wonder how widespread and how dependent on location it is. In Ohio, NY, or Illinois? They might be dragging themselves through the mud on this one. In my state? Some schools are closed (increased food sales for kids at home), but it looked like regular rush hour yesterday and grocery stores are hiring/extending hours to stay stocked.
I agree with your thinking. The plus here, at least politically, is that blue areas will be hit the worst because of how extreme their measures are. Really, who cares if CA blames Trump for issues? They will definitely be in lines for the biggest handouts, and I hope the administration sticks to their guns in withholding federal money to states that do not comply with immigration policies.
Areas relying on spring break travel will be hit hard. People selling food and events will be obliterated. It is going to be ugly until people calm the hell down.