The news flow around coronavirus is only going to accelerate. Which is stressing me out. Here are some recent reads worth catching up on.
“The global march of COVID-19 is beginning to look unstoppable. In just the past week, a countrywide outbreak surfaced in Iran, spawning additional cases in Iraq, Oman, and Bahrain…The virus may be spreading stealthily in many more places. A modeling group at Imperial College London has estimated that about two-thirds of the cases exported from China have yet to be detected.”
“This is why it’s so difficult to handicap the range of outcomes for the coronavirus. There are far too many variables and the virus itself is a riddle wrapped up in an enigma.
You could try to quantify the supply chain problems or business slowdowns because of the virus but it’s impossible to gauge how far and wide fear will spread because of it. Influenza is inherently unpredictable but fear takes the shape of its own virus that infects us all.”
“Since 1950 there have been 34 instances where the S&P 500 was down by more than 6% over its prior two sessions. Considering that there are 17,655 two-day trading sessions over this time period, we have only seen trading activity this severe (or worse) on 0.2% of all trading days, or once every 2 years, on average. So, yes, the sudden drop we experienced over the last two days is quite rare. Maybe the economic impact from coronavirus is greater than most people originally assumed, but who knows?”
“If you are feeling extremely nervous after the last two days, you’re probably taking too much risk. If you weren’t feeling anything, you can probably afford to take more of it. You can do all of these mental exercises, but unfortunately the only way you learn where your line is is by crossing it.”
“No one knows how far the fear over coronavirus will extend or how much stocks will fall in response. What we can be fairly sure of is that individual investors are likely to be among the last—not the first—to sell.”
“Itching to act? I’m not going to preach the extreme and say investors should avoid all short-term trading. Nobody will listen. But I do have two suggestions. First, if you feel compelled to do some trading, try to confine it to a small portion of your portfolio. That way, if you get it wrong, the damage to your financial future will be limited.”
More to follow…