Worst Day Ever for NASDAQ March 16th, 2020

Maybe it wasn’t such a great idea to put the NYSE on algorithms.

Dr. Brian Monahan, the attending physician of Congress and the U.S. Supreme Court, said he expects 70 million to 150 million people in the U.S. will become infected with COVID-19 (as per NBC). Today there are at least 4,300 confirmed infected patients in the U.S.

The 30-stock Dow Jones was down 12.9% today. That’s the worst one day drop since 1987.

As airline travel grinds to a halt globally, the demand for oil is also dropping where oil prices fell another 10%.

As retail stores are closing down (for what could be weeks to months), Amazon is hiring 100,000 more warehouse workers.

So how did the NASDAQ composite do? It actually had its worst day ever, closing down 12.3% to 6,904.59.

New York state now has nearly 1,000 cases of the novel coronavirus. However, the U.S. only has 77 deaths as of March 16th, and is just at the beginning of its pandemic.

With algos feeding on headlines, panic in the stock market is spilling over into the economy and consumer sentiment. That’s not how you protect the economy against a health crisis.

President Donald Trump said Monday that the U.S. may be able to get the new coronavirus outbreak under control by July or August at the earliest. Even with a presumed peak in April, 2020, a recovery could take months and negative growth in Q1 and Q2 and possibly longer.

We don’t even have the data of how bad it is in the U.S. due to a testing kit failure by an under-funded CDC.

Coronavirus panic has already caused:

  • Massive supply chain disruption (in China especially)
  • An oil price war shooting the price of oil down
  • A likely SMB and SME loan disaster.
  • Liquidity crunches that will lead to massive layoffs in multiple sectors (hospitality, retail, travel, casinos, entertainment, etc…)
  • Health leaders widely estimate 30-50% of the world’s population could contract the virus in the years ahead.
  • As demand evaporates, the temporary end of commercial airline travel may be upon us.
  • The uncertain impact on the economy is exacerbated by a failure in containment and mitigation in most European countries where Italy is changing how governments are modeling the pandemic.

Italy has 28,000 cases as its mitigation procedures have been more or less ineffective at lowering the curve overwhelming its front-line health emergency sector. As successful as China and South Korea were in mitigation, there’s no evidence Europe or North America will be as successful, which means April, 2020 won’t necessarily be the peak (even with significant mitigation and social distancing).

The coronavirus, which is believed to have originated in the Chinese city of Wuhan, has swept across the globe, infecting at least 180,000 people – but if millions are likely destined to contract the virus and markets are already freaking out, this indicates fear (sentiment) will upend the global economy in the coming weeks.

This could be worse in some ways than 2008 because it’s not just a ‘cruise lines 9/11, it’s also causing a domino effect on other industries like oil, retail, entertainment, small businesses and many small to medium enterprises (SMEs) who will not be able to afford to outlast the crisis in liquidity.

This is like a travel apocalypse but it piggybacks into a retail apocalypse that could upend consumer sentiment and skyrocket unemployment if this crisis is prolonged, which will in turn impact social stability, and the banks and further weaken supply chains.

Are people over reacting or is the data telling us something that means this is more than just a health crisis or recession nudging like black swan?

At least 5 million people already lost their jobs in China. How many will lose their jobs in the U.S. in 2020?

Dan Wang of The Economist Intelligence Unit expects that 9 million people in China’s cities will lose their jobs this year as a result of the virus’ impact. This means at least 2 to 2.5 million U.S. jobs are likely to be lost if we model the U.S. (where the pandemic is likely to be worse) on those new numbers.

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