Trump Trying to Calm Coronavirus Fears Gives Investors Reason to Panic

Stock markets cratered Monday on coronavirus fears. Donald Trump tried to calm investors’ nerves, probably to no avail.

Donald Trump took to Twitter Monday to calm investors' nerves about coronavirus. Here's why it could backfire. | Image: REUTERS/Yuri Gripas
  • The stock market cratered on coronavirus fears.
  • Donald Trump took to Twitter to try to calm investors’ nerves.
  • Analysts see more downside potential for the stock markets.

When they tell you not to panic, that’s when you run.

This line from the movie “2012” appears to be relevant these days as governments around the globe try to contain the coronavirus.

Currently, the coronavirus is rampaging through South Korea, Iran and Italy. These countries are raising health alert levels while enacting strict emergency measures. None of the countries hit by coronavirus is saying the epidemic is under control – except for the mighty United States.

On Monday, the S&P 500 plunged over 3% and the Dow Jones crashed more than 1,000 points over coronavirus fears. In response, President Donald Trump basically said there’s no reason to panic.

Investors aren’t buying it.

Donald Trump: ‘The Coronavirus Is Very Much Under Control in the USA’

The United States has the eighth highest number of coronavirus cases at 53 with zero deaths. It trails Iran, which has 61 confirmed cases.

To give you a comparison, Iran is scrambling to shutter schools and spray disinfectants in subways to curb the spread of the virus. While officials may be playing down the total number of confirmed cases, they are not saying that the virus is “very much under control.”

That’s why it’s worrisome when a head of state uses a microblogging platform to calm investors. The president even went as far as to say that the

Stock market starting to look very good to me!

Donald Trump trying to convince investors that it is all good
Donald Trump trying to convince investors that it’s all good. | Source: Twitter

The Dow Jones printed its worst trading day in two years. For the S&P 500, Monday’s drop is the largest single-day decline since August. These deep plunges suggest investors do not believe coronavirus is “very much under control.”

Scouring through replies on Trump’s tweet, it appears that his followers are also not buying it. Filmmaker Andy Ostroy pointed out that Monday’s drop wiped out the entire year’s gain.

Over a month of gains wiped out in a few days
Over a month of gains wiped out in a few days. | Source: Twitter

Another follower emphasized that the Dow’s 1,000-point selloff is the third-worst decline in history.

Analysts Expect a Relief Bounce But the Worst May Not Be Over

History-making drops are often followed by a bounce as bargain hunters use the chance to make a quick buck. However, this doesn’t necessarily mean the panic selling is over.

Jason Harris of StockHunterTrading.com believes that the S&P 500 is likely headed lower but a relief bounce is in sight. When asked if the index has more room to drop due to coronavirus fears, he replied,

Yes, but probably not tomorrow. We will see a relief bounce then we see what happens.

JM Vala of Layuptrades.com shares the same sentiment. He said,

I would say that you may see another 100-200 points lower in the Dow, but the market is setting up for a bounce. While the coronavirus is a fear, we have yet to see what it can do outside of a contained area, so that data moving forward will be important.

On the other hand, trader Alex Kruger believes we might see more panic waves in the coming months. He told CCN.com,

I think expecting 1-2 further panic waves in the following 1-2 months is logical, and I do think prices will likely dip further down once economic data for February starts rolling in and it is much worse than the already revised lower forecasts.

The good news is that Kruger believes that the virus will be forgotten in a few months.

That said, I think the bottom is not far away, and in a few months the virus will be nothing but a bad memory, at least as far as markets are concerned.

Mati Greenspan, founder of Quantum Economics, also believes there’s more downside potential for the stock market. He said,

It’s very possible, yes. There’s no doubt that stocks are overvalued at the moment, especially the index funds.

It appears that the stock market is not looking too good at this point. It’s safe to assume that most investors aren’t buying Trump’s tweet.

The above should not be considered trading advice from CCN.com. The opinions expressed in this article do not necessarily reflect the views of CCN.com.

Sam Bourgi edited this article for CCN - Capital & Celeb News. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

Kiril is a CFA Charterholder and financial professional with 6+ years of experience in financial writing, analysis, and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on finance and cryptocurrencies. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Get in touch with Kiril: Email, Follow on Twitter