It will probably unfortunately get worse before it gets better.
When President Trump’s statement was first released, the U.S. stock market remained relatively stable. The Dow Jones Industrial Average started to decline when the State Department’s order to China was first reported.
Investors’ diverging reaction to virus forecasts and geopolitical risks suggest the pandemic is likely priced into the market.
Pandemic no Longer the Biggest Threat to the U.S. Stock Market
Yardeni said a market meltdown could occur to the tune of a 20% to 30% correction. The virus and worsening U.S.-China relations were cited as the primary catalysts.
Declining sentiment around the stock market does not come as a surprise. Many investors expected the U.S. government to focus on economic recovery and delivering sufficient stimulus to the markets. Although this could be good for Americans in the short term, it has negative implications for equities.
There is concern that such a radical change in policy making—particularly with more government spending on more government programs including regulation could be a negative for the stock market.
China Has Been Preparing Against a Bigger U.S. Clampdown