Never underestimate the ability of the stock market to overreact. As we enter the week with news of further spread of the Chinese coronavirus, it seems the Dow Jones Industrial Average and S&P 500 are going to attempt to get halfway to a correction in just one day. A stock market correction is defined as a drop of 10% from recent peaks. As I write this, the Dow and S&P are each hovering around a 3% loss on the day.
Nobody is saying the coronavirus isn’t worrying. You may recall I wrote about it just three weeks ago. But any impact the outbreak will have on domestic and global economies is hardly worth this “the sky is falling” mentality in the stock market. Hence, later this week we are likely to see some large jumps in stock prices as people take advantage of lower prices. We may even see new records as one overreaction, does, of course, deserve another.
This information is not intended to be used as the only basis for investment decisions, nor should it be construed as advice designed to meet your particular needs. You are advised to seek the advice of your financial adviser, legal or tax professional, prior to making any investment decision based on any specific information contained herein. Copyright Cooper Capital, Inc. 2020
