There is a lot of speculation relating to underexposing about the number of deaths from the coronavirus by China. No doubt this is the case. China is the epicenter of the outbreak so spread should be higher. The spread outside of China is low. But after 2 weeks off over Chinese New Year, approximately 240m migrant workers return to China on or about February 20. This date will be very telling about the transmission rate of the disease. Assuming a 2 week infection period – the infection/transmission rates could show a big increase in cases.
People are feeling fearful of the coronavirus and its effect but we still need to account for it in a share market sense.
Remember, if it is not to do with a company’s earnings, inflation or interest rates, it’s news. Most of the talk is about deaths or making comparisons with earlier viral outbreaks. The market should be (and ultimately is) focused on earnings and cashflow. More particularly of concern is the extent of the disruption to the global supply chain. Any disruption impacts earnings and cashflow – shown by Blackmores, Cochlear and other companies flagging issues this week.
But when we are thinking of the stock market we need to sit above the news and emotions – and make rational, clinical decisions in the face of fear etc.
Pythagoras does this using maths and volatility.
Whilst it seems clinical we have to ask the question – what does it mean to global earnings/commodities/share markets. The answer still lies in short term pain without a long term effect – but disruptive to some never the less.
After the People’s Bank of China injected 1.7 trillion yuan ($350bn) into their markets, the markets worldwide are now convinced central banks will save them from the effects of the coronavirus epidemic. In the short term this belief is currently buoying investors.
For example, over the past month, fear has hit commodity markets hard. Oil has slumped, down 15%. Oil is critical in global economic growth. If central banks are going to ensure that economic growth is going to be protected at all costs, then oil prices will recover. Iron ore and copper also dropped 10-15% but with this confidence they have begun to recover.
Our demonstration portfolio has been running since April with 5 Stocks – Orica, Rio Tinto, Incitec Pivot, ANZ and Worley Parsons. It has produced a return on funds employed of 23%+. We aren’t about getting rich quick with high risk. Pythagoras recommends investments using a mathematical method of accumulating wealth over time – with a low level of risk.
| Profitable realized buys | total | 115 | 85% | Gain | 4.1% | Avg Gain |
| Unprofitable realized buys | total | 21 | 15% | Loss | -2.1% | Ave Loss |
| Realized Buys | 136 |
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