Coronavirus Epidemic - Note to Traders

Wall Street Street has been largely immune to the China Corona virus epidemic. Perhaps because history shows it does not pay to be bearish.

According to Dow Jones Market Data, the S&P 500 posted a gain of 14.59% after the first occurrence of SARS back in 2002-03, based on the end of month performance for the index in April, 2003. About 12 months after that point, the broad-market benchmark was up 20.76%.

However, I think this time round it could be different. Beijing is  more important to the world economy now than in 2003, lock down to more cities, restricting movement to an unprecedented 56 million people as it rushes to build a prefabricated, 1,000-bed hospital for victims.

The ability of the virus to halt travel and harm consumption, particularly in Beijing, are some of the ways an outbreak could have economic implications that could wash up on U.S.

The fact that the coronavirus came as a full surprise, has the potential of having a major effect.

Goldman Sachs said in a note on Tuesday it anticipated a 260,000-barrels-per-day negative shock to global oil demand on average, including a 170,000-bpd loss of jet fuel .

For me , the strategy is to Sell Now, Worry Later, while traders may not yet grasp the full impact of the coronavirus, oil bulls already wavering in their conviction, oil prices hit nine-week lows on Thursday, with U.S. crude down 9% on the year while Brent, the global crude benchmark, sunk 6%.

Stay bearish until we see the cases of people infected start decreasing.

This coronavirus epidemic could turn out to be a Black Swan event.

Holding some gold as a defensive hedge could be a good idea.

Have a blessed and happy CNY!

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