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
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.