Coronavirus: Is the Economic Fallout a New Kind of War

By Dale Gillham | Published 23 March 2020

In the latest stock market update, Dale Gillham from Wealth Within advises that with many businesses re-evaluating how they do business, we are now seeing and will continue to see a dramatic shift in how we work and how business is done around the world. The coronavirus has forced many people to work from home and, as a consequence, products and services that support this are booming.

Right now is the time for entrepreneurs and businesses to adapt to this shift as many will benefit, including home deliveries, streaming services such as Zoom and others, IT service providers and the list goes on.

That aside, the big question on everyone’s lips right now is how low can the Dow Jones go?

While it continues to fall, it has good support at 18,019 points as well as 15,293 points. If we go back in history, we find that in 1932 the Dow fell 50 percent in price over 61 days and then bounced to rise 52 percent over the next 151 days before turning to fall, once again, falling 86 percent over 822 days into its eventual low in July 1932. The total fall from the all-time high in 1929 was 89 per cent.

If we look at the 1987 crash, the Dow fell for 61 days and 41 percent in price. Following this, the Dow rose 86 percent over the following 33 months. During the GFC crash the Dow fell over 17 months and 54 percent in price, before rising 74 percent in the following 13 months.

With all that in mind, a 50 percent fall on the Dow would see it trade to 14,784 points which is 22 percent away from the current close. The current fall has occurred over 29 days, and if we compare this to the market falling in 1929, it could fall another 22 percent and around 30 days before we see the Dow find support and start to rise.

Interestingly, the Chinese stock markets are not feeling the effect of the corona virus anywhere near the extent as other major world markets. In fact, it was only a few weeks after the Phase 1 trade war deal between the US and China, which would have delivered an enormous benefit to the US, that the Dow, together with the rest of the world, went into free fall.

This year the Dow has fallen 32.81 percent, while the Shanghai Composite has only fallen 9.98 percent and the Hang Seng has fallen around 19.91 percent. Other Asian markets are also doing better with the STII in Singapore falling 25 percent.

You may call me a conspiracy theorist, but you have to wonder why Asia is doing better. While some wars are fought with guns, others are economical. So is the coronavirus a new kind of economic war?

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