(NEW YORK)–As more industries shut operations due to coronavirus fears upcoming supply chain disruptions could put pressure on global equities near-term.
Fear of the coronavirus already has many people avoiding activities they think might expose them to the risk of infection such restaurants, cinemas, transport providers, hotels and shops. If we were to see a sudden surge of coronavirus cases in the US, or even abroad, the risk of sudden halt to leisure activity could put an immediate bit to workers in these industries.
Start of Supply Chain Disruptions
There is growing concern about international supply chains for China has a much bigger role in these networks than it did when SARS broke out in 2003.
As an example, Hyundai announced it was suspending its car production because of problems with the supply of parts from its operation in China. This could be an early warning sign of possible extensive disruption ahead with other suppliers.
Qualcomm said that the coronavirus outbreak in China presents potential threat to the mobile phone industry, with possible impact on manufacturing and sales.
Foxconn, a major supplier to Apple, has stopped “almost all” of its production in China until February 10th at the earliest due to the coronavirus outbreak.
Market Over Extended
Any one of these stories alone would have been major financial news sending concerns through global markets, but instead we are seeing a “melt up” in global markets as industries continue to shutdown operations.
Both the CDC and WHO say we are months from having any vaccine available to fight an outbreak. Based on these risks, and pending wave of warnings from companies as large swaths of industries continue to shutdown now may be time to get cautious, or even go short the market.
On S&P500 we could see a pullback to minimum 200-day day moving average around 3000 before finding support.
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