• Market Crumbs

Is Coronavirus Just Another Generational Dip-Buying Opportunity?

Image via Science News

Inverted yield curve. Repo market issues. Brink of World War III. Impeachment. Those are just a handful of the unusual events that have surfaced over the last few months that the market has shrugged off. Each has proven to be a dip-buying opportunity as the market continued to subsequently set all-time high after all-time high. 

The latest test of the market's resiliency is the outbreak of a deadly virus known as coronavirus. 2019-nCoV, as the virus is officially designated, was first identified in mid-December in Wuhan, China. The virus, which is a new strain of coronavirus, is said to have originated in the Huanan Seafood Market in Wuhan that "conducted illegal transactions of wild animals."   

Wolf pups, foxes, rats, peacocks, crocodiles, giant salamanders, snakes, porcupines and camel meat are among the wild animals sold with the intent to eat at the market. "Freshly slaughtered, frozen and delivered to your door," the price list at the market read. "Wild Game Animal Husbandry for the Masses."

There is evidence that the virus can be transmitted through humans, as family members and healthcare workers who have been in contact with those infected have also contracted the virus. Symptoms of the virus typically begin with a fever and cough before progressing to more severe respiratory issues.

The death toll from the virus has reached 25, with 830 confirmed cases, according to Chinese authorities. More than 1,000 people are being monitored in China, although these figures are quickly increasing and likely understated. Eight Chinese cities, with a population totaling nearly 25 million people, are now under quarantine.

The virus has spread beyond China to areas and countries such as the United States, Japan, Singapore, Hong Kong, South Korea, Vietnam and Thailand.

Despite the rapid spreading of the virus, the World Health Organization is not too concerned yet. The WHO declined to name the virus a global health emergency at this time. "Make no mistake: This is an emergency in China," WHO Director-General Tedros Adhanom Ghebreyesus said. "But it has not yet become a global health emergency. It may yet become one."

After falling a whopping 1% from the highest level in the history of the world, the statement from the WHO was enough to reward dip-buyers yesterday as markets instantly spiked, finishing the session well off the lows.

So while dip-buyers got the last laugh once again yesterday, it remains to be seen how the spread of the virus plays out and the effect it will have on global markets. At the end of the day, if there's a serious outbreak of a deadly virus, the price of the stock market will likely be the least of concerns.

Finally, the Chinese New Year kicks off tomorrow, which will bring in the Year of the Rat. The Zodiacal Rat is the first of the 12-year cycle of animals which appear in the Chinese zodiac. For those who believe in this sort of thing, the last Year of the Rat was during 2008, when the global financial crisis roiled the world.

Leftover Crumbs

  • Goldman Sachs is trying something new. Beginning June 30, Goldman will only take a company public if it has at least one diverse member on the board of directors, with an emphasis on females. The policy applies to U.S. and European companies and will increase to two diverse board members in June 2021. Citing internal data, Goldman said more than 60 companies in the U.S. and Europe went public over the last two years without a female on the board. Goldman also pointed out that shares of companies with a diverse board performed better. "We’re not going to take a company public unless there’s one diverse board candidate with a focus on women," Goldman CEO David Solomon said. 

  • 23andMe minus 100. Home DNA-testing company 23andMe is laying off 100 employees, or about 14% of its workforce, amidst declining sales. The company's CEO and co-founder Anne Wojcicki, who is married to Google co-founder Sergey Brin, said she was "surprised" to see the market struggling. Wojcicki speculated consumers could be worried about privacy issues related to providing their DNA to the company, as well as spending a few hundred dollars on the kit. "This has been slow and painful for us," Wojcicki said. 

  • They want to dump more unicorns on the public. Following last year's slew of money-losing unicorn IPOs such as Uber and Lyft, Nasdaq President and CEO Adena Friedman said "We are having a lot of meetings, a lot of interest, a lot of companies looking to tap the public markets in the first half." Friedman added "Right now the pipeline of prospects, IPO prospects, is very strong, very interesting." As for the punchline, more than ten years into the bull market with markets at all-time highs, Friedman believes "People feel like it's the right time for investors to take that equity risk."

  • TikTok isn't slowing down. TikTok, the popular video sharing service, has moved into a new 120,000 square foot office in Culver City capable of housing 1,000 employees. Considering the company currently has about 400 employees in the U.S., TikTok is looking to capitalize on its growing popularity. "While we are a global company, having a permanent office in L.A. speaks to our commitment to the U.S. market and deepens our bond with the city," Vanessa Pappas, general manager of TikTok U.S., said. Evan Spiegel, CEO and founder of Snapchat, even said this week that he believes TikTok could become bigger than Facebook-owned Instagram

  • The latest casualty of the retail apocalypse. Fashion retailer Express will close 100 stores, or about a quarter of the company's mall-based locations, by 2022 as it tries to cut costs. The retailer will also cut 10% of jobs at its headquarters in Columbus, Ohio and a design studio in New York. "We have spent the past six months developing a strategy with the intent to return Express to long-term growth and a mid-single digit operating margin. Today we took the necessary steps to put the right organization in place to support that strategy," Express CEO Tim Baxter said.