The stock markets have been free falling the last few days.
I’m sure many of you have seen, a major cause of this is the gaining momentum of the coronavirus outbreak as it spreads across the globe.
The topic I’d like to discuss is whether to sell ASAP before the markets fall further as the virus continues to spread, or to keep current positions/shares as the markets will recover back to normal in the near future?
Look forward to hearing from you all.
Of course we are all guessing Herb, but I don't really think the 'bounce' had any substance to it, hence I don't think the further fall is really meaningful.
I really don't though think the market is reacting to the daily reporting of cases.
In fact I don't think the European numbers were at all surprising (in fact the Italy number I tentatively regard as encouraging).
The Iranian figures were horrible certainly, but in terms of the global situation I don't think they are the main story.
Like you, I'm broadly comfortable with the UK response thus far, but the figures over the next week or so will give a better picture of the effectiveness.
I'm broadly comfortable with the UK response thus far, but the figures over the next week or so will give a better picture of the effectiveness.
The effectiveness is in the past. Has probably delayed spread by three weeks or so, but it's out now and will rise exponentially. I doubt, in our society, if it could have been handled much better. Too many people skiing in Italy. Could possibly have auto-quarantined people coming from Iran. And advised against travel to any part of Italy.
So next step is management. We know the NHS doesn't have enough beds. Other countries don't either. Keeping mild cases isolating at home seems sensible, whatever the EU policy is. Reduces cross-infection. Keeps the beds and staff free for moderate-severe. Advising vulnerable people to stay at home is also sensible - as is saying now that it will become policy, but it's not needed yet: the more self-controlled will start now and the less controlled will hopefully isolate themselves for the period of maximum risk. Taiwan has done incredibly well so far, probably with help of a higher fear factor because they were so affected by SARS. Japan seems to be doing worse than I anticipated.
For myself, what I would like to see is the age related information broken down by gender - the gender ratio is unlikely to be the same in every age range. And information about the different strains as soon as possible. Which do we have in Europe? afaics, from the rather confused reporting on the Chinese research, the first to appear was the less severe, the more severe then took over, before the less severe became dominant. European impact will be worse than the Chinese if we only have the more severe strain.
My broker said the fall was due to the spread of Coronavirus but who knows. I could not understand the bounce so I took the opportunity to sell off quite a few of mine and also do some index shorting. This has certainly helped, even yesterday my investments hardly fell apart from some oil shares which I hold for income I was about breakeven. Some income shares are now looking very attractive with yields around 8-9%
Italy I thought was high, was it not their highest day and there were 49 deaths. Some other countries such as Germany and France updated their figures after I posted last evening. I believe it was the highest day outside China for new new cases and this was with South Korea numbers down. South Korea is the good news, new cases falling and the low mortality rate. Iran is a mess, they released 54,000 prisoners to combat the spread, the problem is it is spreading from Iran to other countries, why governments don’t ban travel from Iran I don’t understand. Numbers on the US are taking off presumably because of more testing.
I think the markets may settle down somewhat next week unless there is worse news.
It was indeed the highest number of new daily cases for Italy yesterday (6-Mar) but it was a relativity small increase on the previous day and in percentage terms was a reduction.
I am writing this in advance of seeing today's (Saturday) figures for Italy, but at this stage the figures for other mainland Europe countries suggest to me that containment is still game on.
If that is the case, then it is a real positive. However, it will create an interesting 'policy decision' - if we really think that containment is achievable (which seems to have been dismissed recently) then we should continue with the current plan. Alternatively there is a real concern that delaying the next onslaught into next "winter" would create major difficulties - so there remains the potential of a policy decision to let the virus really spread over the summer to avoid the most severe effects in the winter.
Risks clearly remain, but personally I am feeling increasingly comfortable with where we are.
Well that's where predictions get you. Today's figures for Italy look pretty grim with a significant uplift in new cases. Much worse than I was hoping to see.
However, I don't think we are quite at the stage where we can say that the "containment" phase has broken down. The stats over the next 3-4 days will give us a much clearer view as to how far europe is in control of the situation.
I think we can't lose sight of the fact there have been worrying conditions in the markets for quite some time:
If major investors are willing to lock themselves in to losing money over a ten-year period, they must be hellishly bearish on economic prospects in general. I think analysts will soon start talking about 'deflationary pressures' much more, once focus moves away from coronavirus & oil prices specifically.
Even after today's decline, the US market is only back where it was in June 2019 (2,740 on the S&P500) and the FTSE 250 back to its level of January 2019. This suggests to me there's still a long way to fall, potentially.
Considering these feel like typical bear market conditions, I'd expect the S&P500 to test its 2,400 low from Jan 2019 and potentially bottom around the 2,100-2,200 range. This would give a 30% - 35% total decline from the 3,400 high.
(Yes, the FTSE 100 is already back to June 2016 levels, but it's been a dog of an index for a long while and has large oil & resources exposure, in particular)
(Yes, the FTSE 100 is already back to June 2016 levels, but it's been a dog of an index for a long while and has large oil & resources exposure, in particular)
But I wonder what historic level the FTSE is at if priced in USD?
OK. Currently I'm in 15% loss and about 20% off my high of highs.
(2/3 of my loss is down to one unfortunate share position.)
I'm sitting here looking at the StockRanks and QVMs and I can't see anything wrong with the micro-data. I expect I, like most Stockopedia subscribers, are holding good stocks.
The Coronavirus is going to run its course for 9 months, there's going to be some kind of jolt or recession.
My Business Partner is concerned about the Housing / Builders sector slowing down 6 to 12 months from now.
Then I guess 2 to 3 years from now we will back to growth and renewal. I think we have to be stoic and patient. (Better to be patient than to be a patient, boom boom.)
I thought Italy's cases may have peaked with yesterday's fall but now I read there was a delay and 600 cases did not get reported yesterday, which explains the high figure today of 2,300 cases. Italy is of course in lockdown but there are still flights coming out of there as people leave. Spain is now second most infected country in Europe unless France has a high figure today.
The good news is South Korea really seem to have it under control with very few deaths, only 60, but I think most other countries will be unable to do what they have done although I see the UK are increasing testing upto around 8,000 per day.
The markets up and down and the oil price crash came as a surprise. Not sure if we have seen the bottom yet.
Yes the dislocation in the Italian figures potentially blurs the narrative. Underlying it looks like new cases have been in the region 1,600 - 1,800 over the last few days. That is worryingly high, but not imho yet indicative of exponential growth.
What I find more worrying however are the reports of how the Italian healthcare systems is massively struggling with the volume. Yet at this stage they "only" have c. 10,000 active cases and barely over 1,000 of those considered serious or critical.
Merkel is predicting that 70% of the German population could contract the virus and if 50% of those occurred during the peak (as per some of the models) that would be nearly 30 Million concurrent cases at the peak (3000 times the current Italian load.)
Similarly in the UK if at peak we have 20% of the population affected at peak that would be 12m concurrent case (1,200 x the current Italian load).
I personally cannot find the justification for some of these very high figures quoted, and whilst I do understand the motivation to ensure 'we' take this issue seriously, as I noted yesterday, I do think there is a danger of a credibility gap (chasm more like) opening up that will create an atmosphere where the populace totally ignore the official projections.
In the near term however I do expect that the picture will look progressively worse over the next week or so (thinking particularly about Europe - which is the real battleground at this time - the US is such a mess that it doesn't bear thinking about).
Some of the numbers from mainland Europe (exc Italy) today are indicative of a sharp rise over the coming days and I think that, whilst welcome, the Italian lock-down will perhaps take a week plus to impact the numbers (possibly longer in the case of Italy itself).
So whilst I do not personally see the four horsemen riding over the horizon anytime soon, I think there will be increasing opportunities over the next few days for the narrative to become much darker over the coming days. So my view is that in terms of "the market" I wouldn't be calling "the bottom" at this point.
I should say though that I can claim no skill at reading sentiment, so this is just a point of view to consider rather than any kind of wise prediction.
I have been attempting to be essentially "market neutral" for sometime now, but I am looking for the opportunity to become mostly long - I just don't think the time or circumstance is yet right for that.
"What I find more worrying however are the reports of how the Italian healthcare systems is massively struggling with the volume. Yet at this stage they "only" have c. 10,000 active cases and barely over 1,000 of those considered serious or critical."
I think the problem in Italy is it is in one area or region, it is a bit like having 10,000 cases in say Yorkshire. My concern is the death rate is very high and yes they have intensive care beds all over the place such as corridors etc.
I was seeing a pattern of a few weeks of rising cases and then a peak before the decline as in China and Korea but I'm not so sure now. Iran if the figures are accurate is seeing a decline in new cases. Maybe the warmer weather will see it off. Iran and Spain should be warming up soon.
I think the figure of 70% of people catching it is absolute worst case scenario, I doubt it will come to that, if it does then there will be real problems. But remember about 80% of cases are mild, so most can be treated at home. I see the WHO are calling this a pandemic now.
I see the USA figures are rising now, Trump had better start taking this more seriously.
Perhaps slightly off-topic from the investing theme itself (although I think the trajectory of the covid-19 news-flow is important - and probably still have some way to go in terms of scariness.)
There was a positive narrative today from the Italian Foreign Minister Luigi Di Maio on the success of the lockdown, despite the overall numbers still looking poor :
Two weeks after the first 10 towns in northern Italy were declared a "red zone" and put under lockdown, he said they had no new infections.
Yet when I look at the regional data for Italy, Lombardy (where presumably most of those towns are) saw 1,445 new cases overall - similar to the previous day's increase.
I struggle to square those two positions. I suppose it could be the case that the locked-down towns have seen no new cases but there has been an acceleration outside of the towns, but I haven't seen any data to that granularity that would back that up.
Does anyone else have an explanation for that?
It might seem trivial, but in fact I really do think that sentiment is unlikely to turn unless and until we see some sustainable good news from Italy - and before we here bad news from the other side of the Atlantic.
Coronavirus sell off or hold? I've decided to run through my town in nothing but a loincloth. I've figured I'll get a better return doing this. Oh I may also trade Fx on my smartphone while I do it. Apparently I can live the life I've always wanted according to Greg Secker........
"Four legs good, two legs bad"
My portfolio is down 8% over the last month, and I am now in 70% cash and 30% equities. I have no intention of getting back into the market until the fear factor subsides, which in my view is several months away. These are going to be very testing times.
There is a lot of talk about the UK's response and whether it is strong enough in the media.
The debate is actually about "non-pharmaceutical measures" - i.e. things you can do to slow or prevent the spread of a virus which are not vaccines or medicines. With so much opinion flying around I thought it would be useful to see what the scientific position is.
The linked document here describes WHO's recommended non-pharmaceutical measures to deal with seasonal and pandemic influenza. It discusses the impact of seasonal and pandemic influenza in terms of prevention and/or flattening the peak of the epidemic. It was created originally after the 2009 Swine Flu pandemic.
It reviews all the available evidence on the effectiveness of NPIs in mitigating the risk and impact. I am sure it has formed the basis of every country's response although different countries may have chosen a different emphasis on the various methods.
In general, the countries are all working their way through table 1 (including the "Not recommended in any circumstances" actions!) (All of these measures are more fully explained in table 4, and the rest of the document from about page 22 onwards goes into more detail than most of us knew we wanted.)
The measures discussed are all the ones we are currently hearing so much about:
This virus is different from influenza and so some measures seem to be working better than with flu - such as contact tracing for example.
I think it is a useful background to what is going on, and why it is going on.
By the way, I think one reason why the WHO were reluctant to call a "pandemic" is because the NPI measures recommended for a pandemic are more severe than an epidemic. However, most countries had already started using the pandemic measures anyway, so eventually it no longer mattered.
Well I don't think the measures have been strong enough, we let people go off to high risk areas, we have no restrictions on people coming to the UK. Football match at Man City behind closed doors but there were a load of Spanish fans outside the stadium. We should have isolated earlier probably too late now.
New cases today up 342 and that may not be the final figure so an increase of over 42% and 10 more deaths.
Soon there will be more reported cases outside China than there were in China. The reported numbers are under reported anyway, some countries don't have anything to test it with or not enough testing kits, has Turkey really only got 5 cases?
I see Trump has now banned flights from the UK/Ireland.
The report below was published today and it appears to be the driver behind today's announcements from the UK and the US. It is sobering reading but some of the most detailed information that I 've seen so far on the effect of different interventions.
What an utter calamity. Twice as bad as previously estimated, and in the order of 8 times NHS capacity. When all avenues lead to unpalatable and/or unacceptable outcomes then we need a radical new approach that alters the mathematics. Might Local Community Action be part of the National Response?
