By: Ross Silver, CEO

Let us please welcome Panic and her closest friend Uncertainty to the party. Since Feb. 12th, the DJIA has retreated by nearly 4,000 points or 13%. What is behind this drop and aggressive selling? The answers are panic and uncertainty. “Investors” are very concerned about COVID-19 (Coronavirus), the Democratic nominee and supply chain issues that may wreak havoc on the U.S. economy as a result of COVID-19. As I see things from my perch, COVID-19 sure looks like a nasty virus and I am surprised the WHO has not declared it a pandemic yet. The virus is not something caused by nature but instead seems to be leaked from a laboratory based on its molecular makeup. COVID-19 is a coronavirus which is a family of viruses that cause illnesses ranging from the common cold to highly fatal respiratory syndromes like SARS and MERS.

Dr. Li Wenliang, one of the first non-government medical professionals to speak openly about the new virus, initially assumed it was a mutated version of SARS, a disease that ravaged mainland China and Hong Kong in 2003 before being leaked again from Chinese labs in 2004.

While SARS killed around 10% of patients, COVID-19 kills around 2%. The difference is that COVID-19 is significantly more contagious. This may be due to HIV and Ebola-like mutations in the structure of the virus. Unlike other coronaviruses, COVID-19 attacks a protein called Furin – just like Ebola and HIV. Scientists believe this is the reason why the virus seems to be significantly more infectious than similar diseases like SARS and MERS.

To summarize, we have no solution to COVID-19 and until we do, expect equities to be highly volatile.

Adding to the volatility is the front runner for the Democratic Presidential nomination, Bernie Sanders. Bernie Sanders being elected President probably results in the DJIA giving up half its value. This is why the equity markets are nervous about him getting the nod over the more moderate, Joe Biden. As a humorous aside, it cracks me up that the Democrats, who supposedly stand for minorities and are the “progressive” party, have three white men as their presidential candidates, why no women or minorities?  

Lastly, the mega factories in China being closed or working at 25% capacity is causing all sorts of supply chain issues. This predominantly affects tech companies, which explains why the NASDAQ is taking it on the chin. When will these issues be resolved? No clue. What is someone supposed to do with their equity investments in this sort of setting? My answer, play defense and pick off small cap stocks that have been beaten up severely. My guess is small cap will lead any rally from these lows and as such, it might be a good idea to have exposure.

Featured Company: Foresight Autonomous Holdings Ltd. (NASDAQ ticker: FRSX)

Take a look at some of the articles we have written on Foresight: https://www.sylvacap.com/foresight