Corona Virus Effects Seen On Stock Market

On 2/24/2020, the DOW declined by -1032 points. I don’t bother quoting a percentage, percentages don’t tell anything at all. Whole numbers give a much clearer picture.

The last two trading days last week the DOW had declined by -128 and -228.

This comes as production in China has been severely negatively impacted by the quarantine due to the Corona Virus.

A major problem here is that to date, the consumer market has not yet seen any immediate effects resulting from the disruption in the supply chain. There have been warnings issued by various banks and investment firms. However, as far as consumer products, as of right now we are still relying on products stocked in warehouses and the last shipments allowed out of China before the quarantine was imposed.

What is likely to be seen as immediate effects would be exports to China. While some orders to China will still be delivered because they were already en route, many of those shipments will sit idly at the docks for some time. Subsequent orders will be impacted more, depending on how perishable the goods involved are. Raw materials for durable goods and complete durable items will be most affected. Which means the impact on the US and other economies will not be completely evident for weeks or months.

The effects will be compounded when considering disposable income lost by Chinese consumers, which will result in curtailed spending for some time after the quarantine has been lifted. The Chinese government can provide for basic necessities but consumer goods will take a considerable impact.

Further downstream, one must consider other countries depend on raw materials and sub-assemblies that come from China, including ingredients for some processed foods. Eventually that part of the supply chain will be affected as well.

One may believe that we do not import enough food from China for survival to be a concern. The truth is that we import billions of tons of food from China annually. Yet the concern does not end there. Reduced supplies of durable consumer goods means decreased sales for retailers. Reduced sales means layoffs. This time on a broad scale impacting basically every industry. Reduced profits in the financial sector because of stock declines mean even the financial sector will be impacted. Reduced imports of medical supplies from China could eventually lead to reductions in available care to only truly…