Removing the noise in this loud world

It's been a long time since the last blog post was made here. While more podcast episodes are being produced, Dissecting the Markets has decided to release our most anticipated blog post today! Note that this blog post is not financial advice and that all content here should be considered opinionated. We're not responsible for any gains and losses. Please do your own research and talk to a financial advisor before making any investment decisions. The writer does not hold any expertise. 

Markets crashing by double digits for the week. The US stock exchanges halting trading two times for the week. Everyone still sells their stocks despite the 15 minute halt that was suppose to cool everyone's minds. Emotions run high.

Photo by Jamie Street on Unsplash

The stock market declines we've experienced are reasonable as the supply chain disruption created by the Chinese government's attempts to contain the coronavirus has caused business activity to plummet and many companies' bull cases to diminish. While the cruise and airline industry take big hits from fears that they'll get infected if they travel, the oil industry has taken an even bigger hit as OPEC declares a price war against Russia, hurting not just many OPEC nations but also the US shale industry. With a supply chain disruption and mass hysteria happening, it's understandable why stocks had to take a huge hit.

Also, while most of the business world panics over the survival of their company, others in the retail industry are generating tons of revenue as consumers panic buy food, toilet paper, masks, hand sanitizers, etc. When looking at the media people are putting out from Tik Tok, Twitter, Instagram, Facebook, etc. the buying has been immense. Walking to the big stores like Costco and Walmart, it's like Black Friday there with many people crowding the stores and fighting over the items that everyone came to buy. This is why many of the big box retailers (and even Amazon) have been doing well during this market sell-off.

When looking at the situation from a macro perspective:

• The low oil prices act as a bailout for many of the cruise and airline companies as fuel is one of their top expenses
• The low oil prices will cause many players in the energy sector to go bankrupt. While many investors fear that this will hurt the financial sector, people forget that the most recent stress tests from the Fed have found that banks can handle situations like these and can continue to pay dividends (with some banks needing to cut back on dividend costs and buybacks if situations like that were to happen). 
• The cruise industry has long term growth ahead of itself as wealth creation is increasing around the world, increasing the demand for cruises. Also, with the transition from expensive diesel and gas to LNG, cruises can cut down on fuel costs drastically while becoming more environmentally friendly. 
• Many airliners have strong balance sheets. This will help them withstand the low demand they're currently experiencing. 
• The tech sector is still doing well. While the tech sector has been the main driver of the current bull market, it has sold off in a big way as fears of supply chain disruption will affect many names. Meanwhile, many companies that have a SaaS (software as a service) business model are doing well as many businesses still rely on software to operate. 
• With the immense pessimism plaguing the energy sector, downstream players are benefiting from low oil prices. For those that are exposed to both upstream and downstream business segments like Chevron and Exxon Mobil, with their experienced management, I have faith that they'll know what to do in this rough business climate. For the upstream players, they're the ones that'll get hurt the most. For the oil services companies, because OPEC has agreed to boost production, it should mean that international players like Schlumberger and Halliburton will get more business while the domestic oil services companies will loose business as many shale drillers will cut back on production or go bust. 
• Homebuilders will experience a slowdown in sales as less people will be able to buy homes due to the declines in the stock market
• Many REITs will continue to do well as leases will still generate revenue for them. Many hotel and retail REITs sold off intensely recently but as long as many of those REITs have strong exposure to big companies that can withstand the coronavirus impacts, they're good. 
• Many of the businesses that cater to the wealthy won't see much impact on their business as the wealthy can withstand the stock market declines. This means that the wealth will be able to still buy luxury goods like handbags, clothes, fancy cars, jewelry, etc. 

Now, I have some concerns:

• I'm worried that Ferrari won't able to produce cars in the near-term as Italy is under lockdown nationwide. 
• I'm not sure if insurance companies will make more money or loose more money as more and more people get tested and treated for coronavirus
• I'm not sure if homebuilders rely heavily on products that are made in China
• I'm not sure if some of the energy companies that I see surviving the oil glut will be able to sustain their dividends

We'll know how the bull market and the economy will do as time goes on. Meanwhile, be safe and if you're in the market for the long term, talk to a financial advisor before buying any dips in the stock market.