Fears the Coronavirus Will Impact the Market Unlikely

By Dale Gillham | Published 28 January 2020

The one constant with the US stock market is that the majority of the news you hear on a daily basis is pretty much negative. It seems like we are hearing a never ending tirade that the market is over heated and will crash soon.

Over the past week I have seen reports talking up the “Wall of Worry” and how this is bad news for the market. So, what is the Wall of Worry? It is simply a chart that shows the financial markets' periodic tendency to keep rising despite a host of negative factors. In other words, it refers to the resilience that the market has when it runs into a temporary stumbling block, such as the US and China trade war.

It is common to hear about the “Wall of Worry” as bad news sells although I believe it is a positive thing given that what we are worried about is often short term and generally not too alarming. What happens when the uneducated investor reads about the “Wall of Worry” is that they over react based on fear and exit or stay out of the market, which is often to their detriment.

It is now week two of reporting season and Apple, and Tesla are the stocks of interest reporting this week. Reporting season will extend into the middle of February; therefore, you can expect to see some volatility in the market, which is normal during this period. So don’t be too surprised if you see the market or a stock fall suddenly.

A lot of eyes will be on the big tech stocks, such as Apple, Amazon, Microsoft and Google as they have been driving the market over the past year or so. The first week of reporting season has so far been quite good with around 70 percent of the companies that have reported beating expectations despite the market expecting 4th quarter earnings to be slightly lower. In 2020, I think we will see a different side to the market, as earnings steadily grow; therefore, in my opinion now is not the time to be exiting the market.

There has also been a lot of speculation around the coronavirus and how this might affect the stock market. While I believe the coronavirus outbreak is a serious health concern that needs to be dealt with quickly, I am not convinced it will have any real impact on the stock market.

Governments worldwide plan for these types of events, so that they can be contained, and from what I am seeing they are doing just that. While my position on the market may change if things dramatically worsen in regards to the virus, right now I suggest everyone sit back and watch rather than act.

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