Media is warning that markets are being too complacent about factoring in the risk that coronavirus poses to the global economy. The reported number of cases has already outpaced expectations and it is a major suspicion of news agencies that China has been dramatically underreporting actual figures. Nevertheless, U.S. stock indexes have continued to reach and stay in proximity to new highs. And “some Asian bourses have recouped losses that followed the initial coronavirus headlines.” According to FactSet, about 25% of companies holding Q4 earnings calls reported impact or modified guidance, due to the virus.
A number of news reporting agencies are alluding to Apple as the ‘canary in the coal mine,’ due to their serious exposure and dependence on Chinese production and demand. Scott Minerd, the global CIO of Guggenheim Investments expects, “This will eventually end badly…The cognitive dissonance in the credit market is stunning.” And he’s not alone, because Diane Swonk, chief economist at Grant Thornton said, “The ramp-up in China will take much longer than many expect because of the need to prevent a secondary flare-up in contagion.”
Meanwhile, high-tech industrial parks in Shenzen, for example, a major Chinese manufacturing hub have reopened, but are dealing with a “sever” shortage of workers, as many are restricted from travel, causing a great number of factories to remain idle. The domino effect continues as months-long protests in Hong Kong have inflicted serious economic damage and is now causing widespread shortages of basic cooking and household supplies. Minerd is predicting that China’s first-quarter GDP could drop to -6% annualized and oil could fall to $25 per barrel. We are either moving into a completely new paradigm, or the speculative energy in the market is incredibly out of control,” Minerd says.
With global economies slowing before the coronavirus impairment, its effect will certainly provide a growing and negative global response. Global market conditions are potentially worse than in 2008 and markets are more oversold. Don’t become a victim of the next market reset or collapse. Call the precious metal experts at American Bullion now, at (800) 653-GOLD (4653) to protect your assets, family, and legacy.
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