As I’m writing this on Monday morning, the Nasdaq is set to open almost 3% below Friday’s close. The S&P 500 and Dow are looking to take an only slightly smaller hit, with futures down 2.7% and 2.8%, respectively.
And unless you’ve been hiding under a rock, you know that the reason is the latest news about the coronavirus outbreak, caused by the virus now called Covid-19.
All eyes are now on the virus spreading outside of China, with Italy, South Korea, and Iran unexpectedly turning into infection hotspots over the weekend. There are several scenarios and potential reactions that will greatly affect which way the market moves. More on that in a minute.
Last week, I wrote to you specifically about the high probability that financial markets could take a hit in the near term. The Reality Gap between what was being reported about the virus’ containment and the truth that the underlying data was clearly unreliable made me turn from bullish to cautious. And the fact that supply chains, as well as product sales, were starting to be effected even made me suggest you buy puts on companies like QCOM and QRVO.
I hope you took those recommendations and ran with them as my premium subscribers did, pulling in gains of 100% on Friday and 158% this morning on those two companies.
I’m writing a lot about the coronavirus because it is THE narrative that is impacting the markets rights now – everything else is a distant second.
Covid-19 in Iran has officially infected 66 people, and killed 12. That death rate is many times higher than seen even in China, suggesting inadequate healthcare or a cover-up. Indeed, a local legislator from the Iranian city of Qom claims 50 people have died from Covid-19 there alone.
Already, the virus has spread from Iran to Afghanistan, Bahrain, Kuwait, and Iraq.
But it’s the developed economies like Italy and South Korea that are the main focus for traders.
Italy jumped from three confirmed Covid-19 cases on Friday to 150 on Sunday, and as I’m writing this has announced 209 cases and seven deaths.
Meanwhile, South Korea announced that new infections have quadrupled since Friday, bringing the total to 833.
Unlike China and Iran, Italy and South Korea are wealthy countries with freedom of speech and democracy. So as they start dealing with the Covid-19 outbreak, traders will finally be able to get unadulterated data about the virus.
That will let us know what we’re really dealing with.