Coronavirus Market Volatility: Have We Reached The Bottom?

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The stock market is rattled by the disruption and mayhem the Coronavirus pandemic is expected to unleash on global economies. “Sell first and ask questions later” remains the default mantra as investors do what they can to preserve what’s left of their portfolios. But have we reached the bottom yet?

On Wednesday the Dow Jones Industrial Average lost 1,338.46 points, or 6.30%, to close at 19,898.92, closing below 20,000 -- an important psychological level -- for the first time in more than two years. The Blue Chip index continues to be victimized by Boeing (BA) which dropped 18% and United Technologies (UTX) which fell 14.48%. Meanwhile, the plunge in oil prices which fell to 18-year lows caused Chevron (CVX) to lose 22.12%, while Exxon Mobil (XOM) gave up 10.02%. Questions about the viability of their dividends continues to come up.

The S&P 500 Index was not spared, losing 5.18% to 2,398.10, while the Nasdaq Composite fell 4.7% to close 6,989.84. Wednesday’s close effectively wiped out all of the gains the market enjoyed shortly after the November 2016 election, which investors dubbed the “Trump rally.” If you didn't think the decade-long bull market was over, falling below the 20,000 mark in the Dow is a clear sign. The decline in the market persisted even as U.S. Senate voted to approve a House-passed Coronavirus bill that targets paid leave and free testing.

The market recovered from much steeper losses after Steven Mnuchin, U.S. Treasury Secretary, provided more details about the $1.3 trillion emergency funding the government is working on, including various initiatives aimed at helping businesses and workers. Some question whether these measures will help. The market would feel more certain if there were some signs that the growth of global Coronavirus case rates has peaked.

To control the number of new cases that are still rising in the U.S., some have asked for much stiffer measures, including billionaire investor Bill Ackman who on Wednesday advocated for President Trump to shut down the country in an effort to curb the spread. “We need to shut it down now...This is the only answer,” Ackman said on CNBC’s Halftime Report. “America will end as we know it. I’m sorry to say so, unless we take this option.”

Ackman’s gloom is being felt among some of nation’s iconic brands. In response to the outbreak, Home Depot (HD), a Dow component, announced it would close at 6PM starting Thursday, though opening hours would stay the same. The stock lost 10.37% on Wednesday. Ford (F) and General Motors (GM) lost 10% and 17%, respectively, after CNBC reported they plan to close all U.S. auto factories.

But I want my readers to know, now’s not the time to panic. America will recover from this, as will the rest of the world. Understandably, some investors are waiting for a drastic decline in the outbreak before jumping into the market again. But by then it might be too late. There are still safe havens out there. Forever the optimist, I still believe in the FAANG+M stocks, referring to Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Google (GOOG , GOOGL) and Microsoft (MSFT).

While these tech titans have not been spared in the market rout, collectively, they have outperformed S&P 500 over the past thirty days. They powered the bull market that just ended and I expect them to drive the next one, including taking the Dow back above 20,000. To be sure, I’m not calling the bottom. But if you have three to five-year investment horizon, as I do, you don’t need it.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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