February 14, 2020
At the end of the trading session on Wednesday, February 13th,
the markets were jumping with joy, celebrating the fact that for the first time
since the
coronavirus crisis
began, things were beginning to turn around, with new infection cases dropping
off in a significant way.
Unfortunately, less than 24 hours later, this hope would be
completely and utterly shattered. Reality returned and China's health
authorities
reported 15,152 new confirmed cases of the
novel
coronavirus infection,
plus 254 new deaths.
This should have sent the markets lower, but in this upside
down world that we live in, the
markets shrugged off this
spike in new deaths and cases, moving once again to new highs.
(Chart
via
google
charts
)
This massive 15,000 increase in new cases
is apparently largely to do with revisions by the Chinese health authorities,
in which they changed their guidelines in regards to the
coronavirus,
Shine.cn
reports;
"In line
with the latest version of the diagnosis and treatment scheme released by the
NHC, suspected cases in Hubei with pneumonia-related computerized tomography
(CT) scan results are identified as clinically diagnosed cases,
said Mi, explaining why
the confirmed COVID-19 cases soared on Wednesday.
The diagnosis criteria revision, which only applies to Hubei, was made to give
clinically diagnosed patients in the province timely and standard treatment to
further improve the recovery rate, according to the NHC."
However, this just
confirms many peoples’ suspicions that the numbers coming out of China are
largely being downplayed, whether it’s maliciously, or simply because they are
overburdened by just how large it truly is, overwhelming their medical
infrastructure in the process.
The coronavirus is often compared to the last major outbreak, SARS, which had huge ramifications for the markets, causing a major correction as fear spread across the globe.
The coronavirus has now surpassed the SARS outbreak by leaps and bounds, both in the rate at which it is spreading and the total number of cases.
(Chart source, worldometers.info)
The markets,
however, continue to whistle a happy tune, comfortable in the fact that the
Federal Reserve and other central
banks around
the globe will throw oodles of money at the problem, if the need does
arise.
(Charts
via
goldprice.org)
The only market that seems to have any
sense of sanity are precious metals, which continue to hold strong and move
incrementally higher as the threat of the
coronavirus spreads
and some smart money seeks the protection of safe haven assets.
Already, companies that rely on China for
many of their parts in manufacturing and products are
reporting issues due to the coronavirus, which
is bringing their economy to a standstill.
If the virus continues to spread to other
countries, people are going to become fearful, limiting travel and trips out to only what is required,
which will exasperate the economic problem even further.
This is going to have a rippling effect, which I believe is not yet being priced into the
markets, as more and more major companies begin to report
the impacts that these supply restraints are having on their bottom line.
Expect a major correction in the near
future if the virus is not swiftly brought to an end in the coming weeks,
expect gold bullion to continue to move higher, expect volatility.
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