Weāve got a some way to go, itās quite early days and weāve not seen similar infection rates to the Chinese experienceā¦yet.
Once we get a sense of the true scale of economic disruption beyond Initial profit warnings and notices of missed earnings targets weāll have a little more to go on.
I think the threat of recession is particularly real in economies where the fundamentals already point to slow or decelerating growth without the crisis of an emerging pandemic. Calling out China, ongoing disruption there could lead to profound supply side impacts across the world and will only compound the problem.
Healthcare system is also better in the USA and they are forewarned. However, supply chains are global so even if the virus remains contained in the USA, it still may have a major detrimental impact on the US economy.
From Barronās:
The coronavirus has severely disrupted nearly every link in the global supply chain, from raw materials to components to finished goods, which could lead to curtailed production, product shortages, and financial stress across a range of industries. How manufacturing delays ripple through the economy isnāt so straightforward, however.
Tech companies, apparel makers, and industrial-equipment manufacturers are likely to be hurt most, given that they are most reliant on inputs from China and Southeast Asia. A prolonged delay in parts procurement not only would threaten corporate earnings, but could imperil companiesā ability to make debt payments.
The healthcare system is worse in America and despite the warnings major government departments have been defunded. The average US citizen can not afford to get tested and go off sick from work due to a lack of healthcare, poor/no sick pay and no savings. If the disease is in the US it will spread faster than anywhere else.
If supply chains remain disrupted for a prolonged period it could potentially turn into a systemic risk given the very high levels of corporate debt; ~US$9 trillion in the US alone.
That being said I donāt think weāre anywhere near that yet.
I think the difference compared to past pandemics is the level of interconnectedness and reliance on highly complex supply chains upon which the global economy now relies. Iām confident that supply chains are however able to adapt.
From a political risk perspective it just feels like this could be used to further the decoupling agenda that is taking root around the globe.
Good discussion about the importance of company fundamentals.
The value of doing research. We gotta invest time to do your bottom-up and top-down research.
Highly recommend to learn to calculate a companyās debt versus its readily available funds. Donāt invest in companies with lots of debt (think capital intensive industries like mining, oil and gas) unless you know what youāre doing. Donāt invest in companies that financed acquisitions with lots of debt unless you know what youāre doing.
People avoid seeing the doctor even when sick because theyāre worried about the cost. This increases potential spread.
When they do see the doctor, they have to meet strict conditions to be tested for Covid-19 by the CDC. Even if their doctors think they have it, CDC wonāt test if any conditions are missing. Can mean infected arenāt treated effectively, or are released back out to continue spreading.
Trump has appointed Mike Pence to spearhead the US governmentās response to Covid-19. You just have to look at his track record with HIV to see how badly qualified he is.
While individual doctors and hospitals may be very good and deliver excellent care on many levels, that doesnāt change the fact that as it stands, the US healthcare system is already badly compromised in terms of responding to Covid-19.
Futures ticking up. FTSE 100 looking to gap up 2% . Nice for those who bought last Friday! Corona virus priced-in or perhaps a coordinated central bank intervention? It wonāt be an easy rally as VIX is still elevated at 40+. For stability it needs to decay towards 20 or lower.
There was a green day last week, and look what happened afterwards. This is optimism on central bank action, but itās not the bottom of the drop just yet in my opinion.
Not going to lieā¦I saw the 2% rise and bottled it! Bought the UK stocks of been keeping my eye on. Probably jumped the gun, but I hadnāt bought the dip at all and didnāt want to miss it. Will probably go again next week.
I dropped in an extra bit this morning aswell Benjamin. My thinking is if this is the start of the reversal Iāve still captured a nice wee 10-12% discount.
Iāve got a spare bit of cash Iām just going to spread over the next fortnight and buy either on the way up, or on the way down should the markets reverse again.
That way I feel like Iām hedged in both scenarios. Iām investing for the next 20/30 years easily into the indexes so Iām sure being wrong a couple of % on a dip wonāt be the end of the world
I was surprised to see the markets up quite so much this morning as I donāt see this as the bottom of the dip. Iāve not started buying yet and actually used this morning as an opportunity to sell a few things to increase cash on hand.
Still sitting approx 85% cash, waiting for my first round of buys - hope (for my sake) that Iām correct.