As it stands now, US stocks are running the risk of increased decline since early December due to the overall fear regarding the coronavirus and its spread. As a result, bullish sentiments are beginning to suffer, sending various indexes to records just last week.
Corona Scare In Full Swing
The markets within the US have a very predictable pattern when it comes to sentiments. Near-euphoric periods of gains are randomly blunted with massive bearish stints that result from outside threats. Equities are going down almost 3% since Wednesday, as futures are starting to drop down. The coronavirus has spread to both Italy and Iran, and it seems the US investors consider this too close for comfort.
The market losses are only being compounded through the high valuations. Just a week ago, the S&P 500 started trading with over 22 times earnings. Nasdaq’s 100 Index had a multiple that almost breached 30. Both these readings are the highest recorded in decades for the respective groups. While the cost of human life is starting to really sink in, equity traders are struggling to get a reasonable estimate when it comes to the impact the coronavirus will have on supply chains and global economies. As the epicenter of the outbreak, China’s industries are starting to suffer, as well.
General “Sell and See” Policy
Chris Rupkey, the Chief Financial Economist at MUFG Union Bank, had a few words to share about this matter in particular. He explained that the world’s stock markets aren’t priced well to compensate for the possible decline in earnings. A primary factor for this decline, according to Rupkey, is the fact that this virus will impact China’s factories, with the upheaval happening on an unprecedented scale. Rupkey explained that investors would be more keen to cut their losses and see how things turn out, rather than take risks and hold stakes that could potentially turn worthless if things escalate too much.
Overall Drop In Value
The stock index futures for the US suffered a downward slide as various countries started to report a new wave of coronavirus outbreaks outside Chinese borders. This, as one would expect, caused general fear to spread about the illness and its capabilities. The Index futures for the S&P 500 dropped down 1.4% for contracts expiring within March, specifically within Singapore. Contracts within the Dow Jones Industrial Average suffered a 1.3% drop, and the Nasdaq 100 managed to drop a concerning 1.8%