Coronavirus outlook & financial predictions March 14 2020

Here’s my outlook for the stock markets & the SARS-CoV-2 / COVID-19 situation:

Short term (next 2 weeks)

Barring some crazy event this weekend (such as New York City quarantined, Trump goes to hospital with Coronavirus), Monday will open up choppy – a small rally, a small dip.

Towards the end of the week as the economic impact of schools closing, travel restrictions & social distancing starts hitting people – along with the C19 numbers growing exponentially in USA – the market sells off Thursday or Friday March 20th.

The FED will announce another $1.5–2 TRILLION in bailouts and QE. Rates will be cut another 50 basis points, bringing us to the lowest in history.

Around the same time, next weekend, things will get serious for the USA as hospitals will start to be overwhelmed in areas where the outbreaks are happening.

The headlines of overwhelmed hospitals will cause panic on the weekend & on Monday March 23, we will see another red day “one of the biggest selloffs in stock market history.”

Trading is suspended & USA bans short selling for 6 months. More stimulus is announced and when the market opens up, it will recover with “one of the biggest single day gains in stock market history!”

Insiders will be exiting, this will be the last chance to get out without significant losses.

Medium term (1–3 mths)

After all this initial crazy volatility – eventually everyone clues in to the economic realities and the stock market heads into a real bear market.

-50% in the stock markets from all time high.

Trillions and Trillions of dollars are spend in the short-medium term to bail out the banks and prop up the stock market.

Strict quarantines like we see in China & Italy are starting to be imposed on the cities most affected by C19.

Testing is ramped up to capacity (like we saw in China) and eventually USA & Canada get the spread of the virus under control.

Hundreds of thousands of infections, but only thousands of deaths. The economic impacts of long quarantines hit the economy hard.

Real estate prices come down 30%, small businesses start going bankrupt. People start to stop paying their student loans, mortgages and car loans.

Trillions are spend on stimulus and bailouts for regular people:

• UBI style checks
• interest rate suspensions on student loans
• debt forgiveness
• mortgage help
• credit card interest lowered
• health care expenses waived related to c19
• tax breaks

The government and the central banks try to pull out all the stops to prevent a Depression.

Medium – Long Term (4–12 mths)

We don’t head into a depression because of the Trillions of dollars being spent, but as the bear market in stocks goes on after the initial crash & volatility, things like Land, Gold & Bitcoin will gain value as people start to understand the value in scarce assets as the purchasing power of the dollar is being eroded by the stimulus and bailouts.

There will be plenty of opportunities to buy assets cheap, invest in businesses at down to earth valuations & discounts. That’s why having cash to “buy when there’s blood on the streets” is a good idea.

If you are wealthy, I would consider not having all of your money at one bank. There will be some bank failures. FDIC & CDIC only insures you up to a certain amount, over that and your losses are not socailzed.

I think Trumps’ slow reaction and obsessiveness with the stock market will cause him to lose the election.

What I don’t see happening

• Hyperinflation (not realistic yet)
• WW3 (not realistic yet)
• Deflationary spiral (not realistic yet)
• 1920s style depression (Keynsianism fixes this to the detriment of savers)
• mass bank failures (possible, but not much you can do to truly prepare for that aside from owning assets)
• violent protests & riots (people will understand that this has to be done to stop C19)
• election postponement (things should be under control by the end of the summer)

Life will go on, this will be an economic event that defines a generation, but it won’t be as bad as previous cycles nor as bad for westerners as it will be for many other people in the world.

Eventually the market recovers and people who were patient & started investing / building / buying the bottom when the trend reverses will be well positioned for the future.

Be grateful if you live in Canada or USA!