The Financial Markets just Slammed into a Massive Iceberg called the Coronavirus

We just witnessed the third largest single day point drop in U.S. stock market history, and experts are warning that things will only get worse if this coronavirus pandemic continues to escalate. On Monday, the Dow Jones Industrial Average was down a whopping 1,031 points, and it looks like there could be more volatility on Tuesday. In fact, the Nikkei is already down 787 points as I write this article. Of course this sudden decline is being mostly driven by fear of the coronavirus. The rapid spread of the virus in South Korea, Italy and Iran over the weekend really rattled investors, and there was a rush to sell stocks when the markets opened on Monday morning. And the worse this pandemic becomes, the lower stock prices are going to go. You see, the truth is that stock prices are primarily based on what investors believe the future is going to look like. For a long time, investors have assumed that the future would be exceedingly bright, and stock prices have steadily trended upwards. But a coronavirus pandemic changes everything. If worldwide economic activity comes to a standstill like we are already seeing happen in China, it is inevitable that there will be a very serious global economic downturn. And this outbreak comes at a time when stock prices have been more overvalued than they have ever been before in American history. Most stocks have been priced “beyond perfection”, and so it was just a matter of time before those prices started to fall. As I have explained many times before, stock prices tend to fall much faster than they rise, and the rapid decline on Monday was quite breathtaking… The Dow Jones Industrial Average closed 1,031.61 points lower, or 3.56%, at 27,960.80. The S&P 500 slid 3.35% to 3,225.89 while the Nasdaq Composite closed 3.71% lower at 9,221.28. It was the Dow’s biggest point and percentage-point drop since February 2018. The Dow also gave up its gain for 2020 and is now down 2% for the year. The S&P 500 also had its worst day in two years and wiped out its year-to-date gain as well. Tech stocks got hit particularly hard. If you can believe it, the stocks of the big tech companies “lost more than $250 billion in value” on Monday… Apple, Facebook, Amazon, Microsoft and Google-parent Alphabet collectively lost more than $250 billion in value as part of a broader market plunge. The tech companies make up nearly one-fifth of the value of the S&P 500, which itself is down more than 3.6%. Apple has the largest exposure to China, as it relies heavily on Chinese manufacturing plants for its top products and on Chinese consumers to buy iPhones.















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