The Coronavirus and Its Effect on Markets!

Dear Reader,


There is a coronavirus crisis engulfing the globe. The coronavirus stemming from China affected global stock markets and stock prices fell around the world.

How long will the crisis last and what effect it will have on stock markets predominantly? I think the crisis will affect seriously Chinese economic growth prospects. China's GDP yearly growth rate will fall significantly below 6% measured on an yearly basis. This will in turn be bad for global economic growth, since China is a major contributor to global economic growth in the last 20 years.

However, the coronavirus crisis will soon be contained, in my opinion. When more time elapses, buying the stock market dip in US stock markets will again prove a good strategy. Oil producing companies, especially, look significantly undervalued as things stand.

I have an interesting observation to share. Whenever stock markets seem overbought, some kind of negative trigger, this time it is the coronavirus, comes up and stock markets fall. It is not so much the essence of the trigger the reason, as far as I am concerned, but it is more the temporary overvaluation of global stock markets, especially. Stock markets in general, as well as individual stocks, seem to hit a valuation wall, which they cannot climb over and simply fall. A good measure for stock market frothiness is, apart from significant upside price action, also the proliferation of news on the stock markets on major mainstream news channels. Also, another signal for overvaluation and mini bubble is when regular people, not professionally involved in the stock market, start talking about stocks.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities.  Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is as is.

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich