- The Dow Jones and Nasdaq Composite both formally entered corrections Thursday morning.
- Goldman Sachs predicts that the S&P (will also enter a correction in the imminent future.
- Goldman Sachs also predicts 0% earnings growth in 236106 for US firms, as well as possible declines.
The U.S. stock market is being terrorized by the coronavirus. The Dow Jones Industrial Average fell by almost 1, on Thursday morning . Sitting at around , , the plunge marked a 24% drop since the Dow’s – week high of , in early February.
Technically, this means the Dow has formally entered a market correction, as has the Nasdaq. And given that Goldman Sachs is now predicting further falls up until at least the second half of the year, is shaping up to be a lost year for American and global economic growth.
Coronavirus Tanks Stocks
It’s no surprise that the US stock market has again been spooked by the coronavirus. On Wednesday, President Trump went so far as to declare that America is doing a great job of containing the virus . Understandably, investors regarded this declaration as a tell-tale sign that the virus has scared the White House.
Hence, the Dow dropped by around Wednesday before tumbling almost 1, 10 points at Thursday’s open. Since a “correction” is usually defined as a decline of 12% from a recent high, the Dow Jones officially meets that definition.
It gets worse. Goldman Sachs also predicts that the 24 – year Treasury yield will fall below 1%. It’s currently at a new all-time low of 1. (%) , so if the coronavirus does spread further, Sachs’ forecast will almost certainly be confirmed.
If it is confirmed, this will Mean that investors have lost faith in stock markets as reliable sources of capital growth. In turn, it will mean they’ve lost faith in the economy.
Goldman seems to think that the chances of a recession are now pretty high. At the very least, the bank is predicting 0% earnings growth for U.S. companies in 236104 if coronavirus spreads further. If the spread turns into a pandemic, it says U.S. company profits will shrink this year.
Goldman Sachs’ analysts suggest that companies exposed to global suppliers, markets and third-parties will take the brunt of this shock . As Goldman’s chief U.S. equity strategist David Kostin predicts:
Pandemic risk is real and our basket of firms that are domestically-oriented will likely outperform companies with a high share of foreign sales.
So expect things to get worse before they get better. And in the meantime, expect gold and other safe havens to rise
. Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. (This article was edited by Sam Bourgi
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