• Lallic Partners

The Second Bear of The Coronavirus In Dow Jones

Koki Mashita | April 13th 2020 | Editor: Nichola Monroe

Easy to understand


Update

As the novel Coronavirus rapidly spread, infection rates have soared, affecting the entire globe.

As everyone predicted, the Dow Jones entered the bear market territory two weeks ago. However, the market has started to rebound and exited the bear market territory. The market has started to bounce due to optimism and the increasing government support. But we must realize the further damage the Coronavirus will cause to our economy and the long journey of lockdowns continues ahead for all of us. We are only 20% down from the 52 week high and it is hard to believe the market is on it’s way to recovery.


Why the market rebounded

The optimism of “flattening the curve” and slowing down the virus does make sense, however the slowing it down will not benefit companies whatsoever, only elongate our current lockdowns. When considered, cities will not stop a lockdown until there are vaccines ready or if the virus dies out. If a city still has some coronavirus cases, the city will remain locked down because if people start to go out again, the city is risking another spread. When the city is in lockdown, the restaurants and other businesses will remain closed.


COVID-19

On Monday April 13th (PST), the coronavirus cases are at 1.87 million cases and there are no signs of slow downs according to the graph by Worldometer.


















Unemployment


When taking a look at the current U.S. jobless claims, it has been a record breaker by four times during mid march. In April, it is projected to become much worse since the number of cases have only risen. The unemployment rate is also just a start since the companies are starting to lay off more employees. When taking a look internationally, some countries just started to lockdown such as Japan. Restaurants in Japan are still open but it is most likely that they will close soon. We also don’t know how many employees will be hired back after the virus since the companies will be running out of money as well as shrunk in market cap.


Company Earnings

Additionally, companies will start announcing their quarterly earnings this week. The quarterly earnings will not be as bad since most of January and February were peaceful months for businesses. However, the next quarter earnings reports which will be released in July will be devastating. It will expose all the effects of COVID-19. The market will be bear led at least til the second earnings report.


In conclusion, we can see the overall economy crashing again and it will not be back at our 52 week high for a long time. However, not all companies will be down, since companies such as Amazon and Netflix have been well off. Even if the market is going down, you can still make money today. You can invest in CFDs and watch for small upticks in the market.


Written for Lallic Partners

Image citations:

https://www.weforum.org/agenda/2020/04/coronavirus-covid19-flu-influenza/

https://www.worldometers.info/coronavirus/

https://www.youtube.com/watch?v=avxw_968QSU&t=105s



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