The Excuse the Markets Needed for a Selloff 📉

A few days ago, the Dow Jones Index had passed 29,000 and was well on the way towards 30,000 – while the S&P500 had been cruising above 3000.

The Bear was still asleep while the Bull was pushing the markets higher – one might have thought.

For how much longer can this remarkably resilient rally continue?

The markets have been looking for an excuse to selloff. The excuse is here, and it’s a damn good one.

The Wuhan 2019-nCoV Coronavirus. 

So far at least 7,700 cases of infection and 170 deaths have been reported in China.

That is the official news, however.

What is really going on, no one can really say for sure.

Follow the live map from John Hopkins University’s CSSE here.

The outbreak might be much worse than the Chinese officials depict it to be.

From my personal experience of rural China, it was noticeable how low the basis threshold for an infection to start spreading was. So much filth.

Less than 500 km away from Wuhan, an asphalted street of a small village served as the local food, meat and fish market, retail area for clothing, electronics and construction materials, as well as waste disposal and main highway.

Meat was being cut, washed, prepared and sold on the sidewalks.

Wastewater was thrown on the ground – and household trash piled by the curb.

Any virus would traverse across the village by lightning speed.

This is serious – and it is being covered up.

When the truth gets out, it will  shock the whole world as to how severe the situation actually is.

Looking back at the SARS outbreak, the prognosis does not look too bright.

According to WHO and CDC a total of 8,098 people worldwide became sick with SARS during the 2003 outbreak of which 774 died.

Considering the conditions in the rural areas of central China where the outbreak originated, and the travel frenzy linked to the Chinese New Year the extent of the virus infection could potentially be far greater than expected.

It is highly likely that 2019-nCoV will exceed the number of people infected and consequently the death-tolls.

Markets will slip worldwide, and directly affected industries will be hit the worst.

We are far away from any vaccine.

Luka Marjanovic

Partner

Luka holds a Bachelor’s in International Business and a Master’s in International Management. During his undergraduate studies he worked as a research assistant in the field of Big Data; founded his own consulting firm providing services to local SME's in various sectors and invested in the capital markets; as well as working pro-bono providing education and career counselling. Prior to his business education, he studied Biology-and-Biotechnology, and served in the Danish Royal Army as Second Sergeant, leading and managing a group under extreme conditions and pressure. Luka has spent significant time abroad, living and working in seven different countries. When he's not in the office, he's chasing the next gusts windsurfing, carving the mountain snowboarding or out in the forest for a jog.

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