The market’s falling this morning after finishing “flat” on Friday. The Dow, S&P, and Nasdaq Composite are down 0.60%, 0.30%, and 0.10%, respectively.
It’s no secret that coronavirus fears limited stocks last week.
Now, however, one Wall Street firm believes it could get a whole lot worse.
China’s having it’s “Chernobyl moment,” argues Raymond James. Back on April 26th, 1986, the Chernobyl Nuclear Power Plant failed, producing the worst nuclear disaster in history.
The Soviet Union was slow to respond to the accident, and as a result, allowed it to generate several long-term, highly damaging effects.
Both regionally and globally.
Raymond James believes that China’s mishandling of the coronavirus outbreak could cause major problems in a similar way.
“If this virus becomes a true global pandemic, the actions by the Chinese leadership will come under great fire as they no doubt contributed to the spread,” the firm said.
“The real impact will likely take years to fully measure.”
As of this morning, the Chinese government claims that 72,436 people are infected while 1,868 have died.
The market, which touched new all-time highs last week, got crunched today after Apple stated that first-quarter earnings will be reduced due to the coronavirus. Other companies have said so, too, but none of them were market-leading Apple, valued at over $1.4 trillion.
Stateside, the Centers for Disease Control (CDC) has confirmed 15 cases. Raymond James believes that we’ll have a better picture of how at-risk the U.S. is in 2 to 4 weeks after the disease has had a chance to spread. The firm’s odds of “notable widespread cases” occurring in the U.S. has increased from 1 in 7 to 1 in 5.
Raymond James also thinks that the market’s impressive performance over the last month came by way of a “liquidity rally,” as investors hid their funds in blue-chip stocks.
“[Investors] want as much liquidity as possible in case they change their mind,” the firm said in its report.
Former FDA Commissioner Scott Gottlieb, meanwhile, believes that Japan could be next on the outbreak’s “hit list”.
“[Japan’s] on the cusp of a large outbreak and maybe epidemic growth in Japan. We need to watch that very closely. They’ve had a doubling of cases just in the last four days,” Gottlieb said on CNBC’s “Squawk Box” this morning. With 59 confirmed cases and one death, Japan could be facing a critical inflection point.
Gottlieb continued, saying that “if you start to see this become an epidemic in other nations […] that’s going to be extremely worrisome that we’re not going to control this globally.”
Whether the outbreak takes hold in Japan remains to be seen, but for now, the fear that it will is very much confirmed. Apple, in issuing its warning regarding first-quarter revenues, may have pushed the first “domino.”
The rest could fall once American companies – many of which depend on Chinese manufacturing – are forced to admit that Q1 could be a stinker, causing the market to sink.
Regardless of whether the coronavirus spreads to China’s neighbors or not.
