The coronavirus stock market crash is in progress. The storm came fast and furious with the U.S. and Canadian stock markets falling about 21% in a month. And that was after they were somewhat lifted by a relief rally on Friday.
The turnaround or contrarian stock ideas I discussed, in my last video, were way too early to be considered. My positions in Carnival (NYSE:CCL, LSE:CCL) and Booking Holdings (NASDAQ:BKNG)stocks, respectively, are down 40% and 18%.
In the previous video, I said Carnival stock could triple one’s investment. At the current levels, it can be a six-bagger over five years, if it makes a comeback.
Of course, the coronavirus pandemic can drag these stocks even lower. In the worst-case scenario, Carnival could go bankrupt. However, it’s too early to conclude that it will. The probability of it going bankrupt should be slim given it is a leading global cruise company and has an A-grade balance sheet
How the Coronavirus is Affecting Stocks
Stocks are driven by their underlying businesses. Due to the coronavirus, Walt Disney (NYSE:DIS) will begin shutting down its theme parks in Florida and Paris and new departures for Disney Cruise Line starting this weekend for a month. However, it’ll continue to pay its employees.
These follow the forced shutdowns of its parks in Shanghai, Hong Kong, and Japan. Without a doubt, all of these suspended operations will pressure Disney’s near-term earnings.
Across Italy, Starbucks (NASDAQ:SBUX) is closing its stores until April 3, while Burger King, a part of Restaurant Brands (NYSE:QSR, TSX:QSR), will remain closed until the end of the health emergency
It’s no wonder Disney stock has fallen 27% since its high in February. Starbucks stock has dropped 22%, and Restaurant Brands’ stock value is slashed 31%.
COVID-19 Causes Real Disruptions to the Economy
The spread of the novel coronavirus impacts the global economy by temporarily shutting down businesses and schools, and disrupting supply chains. People are advised to stay or work at home, limit traveling, avoid large gatherings, and prevent physical contact with others.
So far, the virus has caused more than 5,400 deaths. The COVID-19 outbreak in China seems to have subsided. But outbreaks have only begun in other countries and others are expected to follow.
For example, Italy is now the country with the largest number of confirmed cases of the virus second to China.
To the huge disappointment of fans, the NBA season has been suspended. This means it could be delayed or eliminated for this year. A bunch of part-time workers will lose work hours because of this. The article referenced in the description below discusses five other potential fallouts from the NBA suspension.
Large events in other places are canceled or postponed, which will reduce the opportunities for surrounding businesses to make above-average earnings. For example, the St. Patrick’s Day parade in Toronto, Canada, is canceled this year due to coronavirus concerns.
As long as the coronavirus continues to spread, it’d be a serious impact on the global economy.
The Coronavirus Stock Market Crash is not over. Here’s What You Can Do.
The coronavirus will come to pass eventually, but in the meantime, it heavily weighs on the stock markets. Years from now, you’ll see today (and possibly over the next few months) as a super buying opportunity for long-term wealth.
History shows that market corrections tend to last 4-6 months. Since the North American stock markets started falling in February, May to July could be a better time to buy.
3 Simple Strategies to Buy Stocks
Of course, the situation is fluid. So, investors may average in quality stocks, that are getting attractive for long-term investment. They include Disney, Starbucks, and Restaurant Brands stocks.
Instead of catching falling knives, though, you might wait for the market to tell you when to buy. For example, the market would go sideways or is confirm upward price actions with strong volumes.
Perhaps, the safest time to invest stocks is when there are no new COVID-19 cases, or when a vaccine has been created. I suspect the stock prices will be cheaper then than it is now.
I’m Saving Up Cash
I will hold on to the stocks that I already own but will collect dividends to combine with monthly savings. This will increase liquidity for me to deploy in a few months.
In the meantime, I’ll review my stock shopping list. In subsequent videos, I’ll discuss what these stocks are.
Other Resources & References
- Various Pixabay artists, F.A.S.T. Graphs, Stockcharts
- Investopedia: Bear Market
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Disclosure: As of writing, we own shares of BKNG, CCL, DIS, and QSR.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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