Light at the End of the Coronavirus Tunnel?
The S&P500 has dropped 34% since its peak on February 20th amid the coronavirus turmoil. I believe now is the time to begin buying stocks once again.
We are in the midst of the greatest market panic comparable only to 1929, 1987, and 2008. The level of fear has reached a climax and people will soon begin to realize that the world will not end. We are very close to this inflection point where panic gets dialed back down. The market is a discounting mechanism and it will go back up long before the actual number of coronavirus cases peak. We are now entering the parabolic phase of the virus where you will see total infection numbers accelerate very rapidly as awareness of the virus and testing causes a big spike in the numbers. Just like all parabolas they will fall just as fast. We look to history for guidance here.
You can see a big spike in the rate in October of 1918 but look what happens only one month later. The numbers drop off significantly. So yes, the numbers will continue to move up the next several weeks, but they will slow significantly by early to mid-April before dropping off in May as most people are cured.
China and South Korea are already in the stage where infections have come to a halt and very likely Europe and Italy are not too far behind. The market will begin a new rally phase once it begins to discount what I have just explained. The market right now only cares about one thing: when will the rate of infections peak? Once the market sees the light at the end of the tunnel and I do believe we are very close, I am expecting a major rally of perhaps 15%-20% in a short time frame perhaps a few weeks' time. I would expect another wave of selling to come after we get a major relief rally in the near future. I will write an update once this next rally phase is complete.
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