The U.S. stock markets saw a 3% drop in each of the past two trading days and everyone is of course going nuts. After hovering at all-time highs for the past few weeks, the ever expanding threat of the coronavirus has finally spooked the markets into a mild drawdown. As I written about it briefly last week, the economic impact of the coronavirus is a huge lagging indicator, and we’re just starting the see the beginning signs that everything is not going to business as usual.
Being a relatively young person, I am immensely long on the stock market, so the past few day’s drops don’t materially affect me at all. I can’t even pull money out or put more money into my ROTH IRA: the former is restricted by definition, and the latter is restricted under the federal guidelines of $5,500 per year maximum. But it’s fun to watch, isn’t it? I certainly had a good laugh commiserating with workmates about how much money we pseudo hypothetically lost in the past 48 hours. That is, unless you have individual positions in Zoom or Campbell Soup: you’re actually up!
It’ll be interesting to see how President Trump reacts to this slump in the market, especially if it continues on (as of writing we are on pace for a third consecutive day of red). Trump sees the stock market as a de-facto referendum on his presidency, so any significant decline - like the ones we saw in the 4th quarter of 2018 - triggers him into irrational action. I’m sure Federal Reserve chair Jerome Powell is already hearing from our President to do something about this latest contraction; to continue lowering the borrowing rate and increase the Fed’s balance sheet.
Meanwhile, more so than fears of losses in the market, the coronavirus issue seems to still be proliferating, with bad news continuing to come out day after day. A friend of a friend has cancelled his wedding in South Korea because of the travel issues for attendees, and surely they’re just one of many couples in Asia that had their wedding dates affected, through no fault of their own. Yesterday, San Francisco Mayor declared a local emergency so the city can allocate resources in preparation should the virus spreads to our area. It appears we - the United States - are steeling ourselves for that eventuality, and not for a matter of if.
At the bike barn.