The Dow Jones Industrial Average dropped more than 700 points in early trading this morning amid reports of the Coronavirus spreading outside China. As of this writing, the Dow is 860 points in the red, a slight rebound from its deepest drop of 997 points.
“The second-largest economy in the world is completely shut down. People aren’t totally pricing that in,” Larry Benedict, CEO of The Opportunistic Trader, told CNBC. Benedict predicts that stocks may see a correction of as large as 10 to 15 percent.
A 10 percent correction in the Dow would represent a loss of 2,800 points.
“It seems like there’s much more to come,” Benedict said, adding that some stocks, such as tech companies, seem to be over-owned.
The day is not over and a 700-point drop is not unprecedented in the Trump era. CNBC points out that there have been at least seven other such one-day declines in the market in the past three years. In the past, the markets have been able to absorb the shock and return to their record-breaking climb.
However, many of those past market drops were based on factors that could be more easily accounted for and adapted to such as Administration pronouncements about the tariff war. In the case of the Coronavirus, in addition to the loss of China as an import/export market, there is uncertainty about what the future holds.
Where will the virus turn up next? To which countries will trade be shut down? Will researchers find treatments or will the disease run its course? Right now, there are no answers to these questions.
Originally published on The Resurgent
Originally published on The Resurgent
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