What will coronavirus do to the stock market in 2020?
I personally believe that this is only the start of the recession. There’s a much higher chance of stocks going lower from here and the recession lasting six to 18 months. As of right now, if you haven’t seen the U.S. has the most cases of coronavirus and the number of cases is only growing exponentially. This is due to a huge inefficiency of not having enough kits to test early-on. The U.S. did not contain the outbreak or take it seriously. We’re playing catch up. For the U.S. only around half the States are currently quarantining. This is kind of crazy, especially added to the fact that we haven’t banned domestic travel. Someone from X state could bring it over to another state. It’s not effective if some States are quarantining but other States aren’t.
We need to understand how long coronavirus will last and how the consequences of coronavirus will affect the economy. There are three possible situations of what could happen.
The Three Possible Situations
The first situation is that every single country is able to contain the coronavirus. Everything disappears. We go back to normal life in the next month. That’s very unlikely. Even after countries reach peak level of outbreaks, there will still be more people catching coronavirus at a slower rate.
The second possible situation is people accept living with the risk of coronavirus and operate normally. The second order consequences of this situation would be that millions of people are infected rapidly and potentially die. If this were to happen our healthcare system will not be able to care for the amount of infected people. The amount of people needing care will overwhelm the limited medical resources and healthcare professionals available. That is a recipe for disaster.
Lastly, that brings us to the third situation. This is that a prolonged quarantine will continue to be in effect in many States. As of today in the Bay area, the quarantine is supposed to last until May 1st at the earliest. Although this will slow down the rate of infection, it cannot fully solve the situation. I believe this is going to last until we’re able to figure out a vaccine. Experts say this is around 12 to 18 months away. There will be prolonged periods of quarantine that will continue to put a lot of people out of jobs. For example hospitality companies, travel companies and small businesses will suffer. People are spending less because they’re inside.
The Start of a Recession
The stock market has not yet priced in all of these factors. I think this is just the beginning of the recession, and we should be seeing lower stock prices. Now’s a great time to start looking to invest into the stock markets if you haven’t already.
I’m personally looking at a few different stocks and industries – like hotels and flights. These industries are important to look at because in the eventual future people people will start traveling again. A lot of these different industries have heavily discounted stocks. I have another video on my top 5 stocks picks for April 2020 if you are interested. The consequences brought on by coronavirus will leak into the economy. Consumer spending is going to go down.
Overall GDP will decrease because people spend less, businesses make less, which means businesses will hire less people and be less committed to growth. It is a downward spiral that will require either the government to step in and inject even more money than the $2 trillion that they already have. If they inject more, we’re going to have significant later order consequences down the line. We’re assuming that people can go back to work within a month, which does not sound plausible whatsoever. These factors have not priced into the stock markets yet. We will have a bigger bloodbath in the future.
That’s my current thoughts on the economy and how it’s going to affect the stock market in 2020. Let me know if you enjoyed this post. If you have any questions or if you disagree with me, please comment below. I would love to hear your thoughts and opinions on this. If you like what you’re reading subscribe to my youtube channel: https://www.youtube.com/channel/UC1kwgWOHVon3gEesdKR65Jg?view_as=subscriber