On March 5th I posted this prediction.
Here we are:
Having wrote a series of articles calling this move on Forbes, here:
February 26th Market Crash what investors should do now.
And here:
If the market crashes what next?
It behoves me to call ‘What next.”
This is incredibly tricky but here is my call.
This move is the big first leg of a crash and is the start, not the end of this crash event
There will be no V bottom.
A 25%-30% fall in the Dow will mean a 40-50% fall in the Nasdaq.
I believe this to be highly likely and the predictor of that will be the growth rate of the Coronavirus currently running at reported rates of 15-20%
This rate even if the growth rate falls sharply quite soon, will lead to a 1,000,000+ infection tally outside of China unless magically the growth rate collapses. This will cause a period of market panic and slump.
The lack of reported infections in places like Brazil, Russia, India also begs the question of the current count before you even wonder about numbers in places like Iran and a China reporting only about 100 new cases a day. This tends to suggest this outbreak will turn into a rolling health issue that will see it reach a chronic phase that will weight on the global economy perhaps for years.
These factors will be factored in by the the US outbreak forms to be more than a few hundred ‘isolated’ cases. This moment will see a base to the market slump.
As I wrote here in February, I’ve been out of the market since the 24th of February. I do not short, so I have no axe to grind about market levels. I will reenter the market when it has based.
What to do?
I covered this in:
The context is best seen by looking at the European markets.
Europe is head for 2016 levels fast. Why wont the US markets?
Until the market bases this is my road map.
The market will base and it wont bounce fast because the Coronavirus will keep the market suppressed for at best weeks, probably months, perhaps a year or two.
As such there is no point in trying to catch the bottom, the market will give everyone lots of time to time their entry.
When Virus growth rates outside China get under 10%, then we should have been the bulk of the fall, but it is impossible to catch the bottom and best not to try.
You have to buy the Crash but you should buy the aftermath, not the collapse and right now, this is the collapse.