Coronavirus, the stock market, and the economy

by JDH on March 7, 2020

That was a fun week, eh?

Last Friday, February 29, the SPX traded under 2,875; this week it didn’t trade below 2,900, so on that basis “support is holding”.

Of course on Wednesday it was over 3,125, so the drop to 2,900 on Friday is a 7% drop, which is not a great three day performance, so your perspective on where we are at will depend on your starting and end points.

We are clearly not out of the woods yet.  The RSI is low, and days of heavy buying are followed by days of selling, so more stability is required before the all clear signal can be given.

Gold made a new 5 year high this week, so that presumably is a continued “flight to safety”, so gold’s action is probably not good news for the stock market.

This action is driven, it would appear, by fears about he coronavirus, or Covid 19, or whatever we are calling it.

There’s a great interview between Naval Ravikant and Scott Adams on this topi (episode 840 of Coffee with Scott Adams) where Naval makes the following points:

This experience will push us to do what we should already be doing:

  1. Push us to be cleaner – be more hygiene conscious – long term that will reduceslds and flu
  2. Move us to the future faster
    1. Robotics
    2. automation
    3. Telepresence
    4. VR
    5. Remote work

He correctly states that there is a lot of “pretend work” in most white collar jobs.  We attend meetings, and pretend to be working, and it will become clear if a lot of people are not able to go to work that “work” still gets done.  It happens every summer, and during strikes, and at Christmas; the world does not end.

This could be great, long term, for the economy.

We may realize that conferences are a waste of time and effort, and start doing our meetings by teleconference.  Eliminating unproductive activities is bad for the conference industry, and airlines, but good for everyone else.

Remote work may become more of a thing, and again, that’s good for reducing traffic congestion, pollution, and it’s better for the environment.  It’s also good for employees, who won’t be limited to jobs in their city; they could work for a company across the world.  Employers can save money on rent.  Not great for real estate, but good for many others.

I believe we will recover, better than ever from coronavirus, but we’ve got to retest the bottoms, so I’m not deploying new money now.

I’ll take some profits in gold, hold some cash, and watch to see what comes next.