Thousands of stocks, globally, are getting killed as investors shed equities in the face of mounting coronavirus infection rates and deaths.
As bad as it’s been for global stock markets, it could get a lot worse if the number of deaths attributable to the virus, which two days ago was 1,075, increases dramatically along with infection rates and most frighteningly, mortality rates.
The World Health Organization (WHO) estimates the blended global mortality rate from the coronavirus is 2%.
That blended rate incorporates some countries’ mortality-to-infection rates at zero, some as low as .001%, China’s national rate of 2.1%, and the 4.9% rate in Wuhan (the epicenter of the virus).
With the death toll from the virus likely to rise significantly as the virus spreads and underreported deaths in China and Iran come to light, stocks are going to get killed even more.
This Is Where the Bottom Is
U.S. listed equities have already lost more than $4 trillion in value. Global equities have lost another $2 to $3 trillion.
While no one knows where the bottom might be for falling stocks, some analysts are calling for a bottom any day now, some are saying it’s time to start buying beaten-up big-cap names, especially tech stocks and industrials. Some analysts see the selloff as overdone relative to mortality rates and the total number of deaths from the virus.
Recognizing that no one knows where and when the bottom will come is the correct way to look at the market. Buying into stocks too early could work out. Then again, it could cause quick, mounting losses.
The reason stocks probably have more to go on the downside is because death rates and mortality rates could increase dramatically. If rising statistics are ahead, investors won’t want to hold onto any new buys they make and will start selling more of their holdings to protect their wealth.
Of all the investor categories, the passive investing crowd is firmly in the driver’s seat, and by that, I mean they’re driving the bus deeper into the big ditch ahead.
In a comprehensive report I’ll release next week on the coronavirus and its impact now and on future markets, you’ll see in detail how passive investors who turned “active” are driving down the market and why they’re not likely to take their feet off the accelerator. You’ll also get a detailed, in-depth analysis of all aspects of the virus’ impact on companies, sectors, countries, and global markets. And, you’ll get a trading and investing plan as a roadmap.
As you probably already know, I’ve been talking about what would happen if passive investors turn active.
Last Tuesday, after the Presidents Day holiday, I warned you to hunker down because the coronavirus wire was about to trip up markets.
If you didn’t follow my advice last Tuesday, this week I said, “What’s happening right before our eyes is investor psychology turning negative. The question investors should be asking now is, will more negative news and fear trigger panic selling? It could and probably will. Now’s the time to put in your stop-loss orders, take profits, and start raising cash. Markets are likely headed another 10% to 20% lower because psychology is changing every day, getting more negative the longer the coronavirus spreads globally.”
Nothing’s changed. Except for the fact that we’re seeing more selling than anyone else expected.
On the heels of a week like we’re having, Friday’s usually end up being a bloodbath as investors fear holding stocks over the weekend. When that happens, which we’ll see on the close today, Mondays can be deadly.
That’s where we are right now.
Unless we end up today on the plus side, Monday’s likely going to be another big down day.
You’ve been warned.