The new mistake everyone is making: assuming the market will automatically recover when virus recedes

by Jackovdajakoff

A large amount of you thought the virus was a “glorified flu” that would have limited impacts on the market.

Now the common malarkey I see here is that “the market will shoot right up as soon as the virus is under control in 3-6 months.”

This assumes that the bear market we are seeing was entirely caused by the coronavirus and not that the coronavirus was a trigger that caused a sell-off for other/additional reasons.

Once the virus is “under control” we are going to see many following quarters of negative earnings reports. We will likely be in a recession marked by job cuts that will impact the affected people’s ability to pay their mortgages and contribute to 401ks and make discretionary purchases. Consumer confidence will remain challenged. The market will have to readjust to an environment where the Fed can’t bail it out with an interest rate cut automatically as it has the past decade.

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Additionally the massive amount of bail outs to industry and support of affected workers means even more debt on top of an economy that is more indebted at the government, consumer and corporate level than in 2008.

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Don’t make the mistake of viewing the current market environment solely through the lens of COVID-19. We will be in an entirely new economic environment when this passes.

My largest concern is the debt that companies are going to need to repay when they have no revenue coming in. How many bankruptcies are looming on the horizon?

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.

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