People started panic buying. Not stocks but toilet paper, which is obviously more important to survive. The irrational thing is that people are so scared to get infected, but they all run to the supermarkets. The density of people in the supermarket is so high. It seems people find it more important to buy toilet paper and pasta than to not get infected. People follow what others did in other countries. They were panic buying so it also happens in the Netherlands. It also does not help that prime minister Rutte said not to start ‘hamsteren’ (read: panic buying). It is like publicity. Bad publicitiy is also publicity. Saying the word ‘hamsteren’ is what people hear.
Europe is the new Wuhan
Europe is the new epicenter of the Corona virus pandemic. Which is not so great as Europe is everything but a unity. Every country decides what they want to do themselves. And they are all having different opinions and ways of dealing with stuff. There is no good coordination between countries and everyone tries to save its own ship. Most of Europe is closing its schools, the Netherlands leave them open (just heard they close them as well, but you get the idea). Governments are just trying stuff out, instead of following the examples that are set by China and for example Taiwan. They should consult with those guys and decide on what to do. Ofcourse, China is different than Europe. In China there are cameras to check if you leave the house or not. If you do, you are in problems. In Europe, such things are unthinkable. Current extreme privacy policies are also not helping tackling the problems. Europe is too liberal to follow Chinese disease dealing standards, but still we can learn from them.
A benefit of this all is that the CO2 and nitrogen emissions are going down massively, so that we can pollute the earth further in the next years to compensate (that is a joke).
People went long toilet paper, selling stocks
The stock exchange has been pricing in most of the current trouble regarding the Corona disease. Last week stocks sold off heavily with most indices falling around 20% in one week, after Italy put the country on a lock down. More countries are following now and that was where all the panic was about. The upcoming week will be volatile again. On Friday we saw a huge rally on Wall Street, based on Trump declaring a state of emergency and freeing up $50bln in additional funding. In the end he did not say that much actually, but the stocks moved up hard with the S&P gaining as much as 9%, where at 17:30 the AEX was still unch and the S&P was up a couple of %.
What about tomorrow?
For Monday I expect a retreat back down with the S&P opening down 3-5% and the AEX opening unch. The weekend did not bring much relief and wordwide cases are still rising more day after day. Not in a panicky way but they are steadily increasing day to day. Add to that that governments have restricted traveling further and for example Spain has followed Italy in locking down the country. If these measures show any virus slowing down in the next days/weeks, I expect the stock indices to have bottomed.
Quite some stocks are oversold and are punished severely. Some of them do offer great risk/rewards.
