Market Overview

COVID-19: Where It's From And Where We're Going

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The entire financial market has been severely impacted by the novel coronavirus, COVID-19. That said, how did this natural disaster unfold and what does it mean for traders and investors?

Background

In 2015, FDA scientists, American and European scholars, in addition to the Wuhan Institute of Virology, Chinese Academy of Sciences, in Wuhan, China warned about the emergence of a severe acute respiratory syndrome coronavirus (SARS-CoV). Their work suggested that SARS-CoV would re-emerge in viruses circulating amongst bat populations while the evaluation of SARS-based immune-therapeutic modalities revealed poor efficacy.

In March 2019, virologists at the Wuhan Institute of Virology, where COVID-19 originated, warned about the potential for an outbreak that would cause a worldwide pandemic.

Now, a pandemic has been realized, causing thousands of deaths and uncertainty-induced turmoil in the financial markets.

Impact On Financial Markets

The SPDR S&P 500 ETF Trust is down in excess of 30% since it’s February all-time-high, buoyed by massive monetary stimulus and safe heaven sectors like real estate, healthcare, and utilities.

The worst-hit sectors include energy, financials, and industrials, while digital assets like Bitcoin have suffered drawdowns over 20%.

Additionally, commodities like gold and silver have stumbled, with oil performing the worst due not only to the COVID-19 demand scare, but also a price war between Saudi Arabia and Russia.

‘Be Greedy When Others Are Fearful’

If you are a buy-and-hold investor, companies with strong fundamentals can offer the most stable returns, with factors like liquidity and balance sheet strength sparking massive interest in stocks like Chevron Corporation (NYSE: CVX) and Johnson & Johnson (NYSE: JNJ).

In the past week alone, Dallas Mavericks owner and Shark Tank mogul Mark Cuban increased his position in Twitter, Inc. (NYSE: TWTR) and Live Nation Entertainment, Inc. (NYSE: LYV).

In the technology sector, cloud-based communications companies, such as Zoom Video Communications, Inc. (NASDAQ: ZM), alongside similar services, are making new highs due to the recent surge in telecommuting.

In times of uncertainty, money flows into safe havens like utilities that service high-yielding sectors concerned with water purification, sanitization, and power production. Since utilities are part of the public service landscape, they are heavily regulated and almost always a stable business to invest in.

At Bear Bull Traders, we analyzed past epidemics – including MERS, SARS, and Ebola – and observed that the market is meaningfully higher some 3 months following peak global infection. China has realized a decrease in the number of new cases, while other parts of Asia, as well as Europe and North America, are now preparing for a worsening situation.

As a result, I significantly increased my long-term exposure since the beginning of this week, with anticipation that the pandemic will peak in the next 3-6 months and markets will return to their upward trend.

About the Author: Andrew Aziz is a trader with the Bear Bull Traders community and the author of several trading books.

To learn more about investing and trading, check out How to Day Trade for a Living by Andrew Aziz, the Bear Bull online education and social community at bearbulltraders.com, as well as Aziz’s personal LinkedIn, https://www.linkedin.com/in/traderandrewaziz/.

 

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Posted-In: Andrew Aziz Chevron coronavirus Covid-19 Johnson & JohnsonNews FDA Opinion

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