I hate to say I told you so…
OK, that’s a lie. I love it! But I should probably be a little nicer on days like today where the delta variant stock market “crash” is causing some people — and the markets — to worry.
But I don’t think climbing COVID-19 cases tell the whole story.
If you read my piece on Friday, you’ll remember that I said, “If the Russell [2000] breaks through that trendline, represented by the green diagonal arrow, that would be a bearish short-term indicator.”
Well here we are today…
Source: Bloomberg
The rationale for Monday’s sell-off is supposedly, “concerns over the spread of the COVID-19 delta variant.”
But I’m not buying the story of a delta variant stock market crash…
And I don’t mean that an outbreak wouldn’t have a significant impact on the markets… because it would. A massive upsurge in cases would be bearish for aggregate demand of goods and services.
But it’s still way too early to tell how genuinely severe — or meaningless — an effect on the economy it will have.
The Reality Behind the Delta Variant Stock Market Crash
For context, most states don’t report COVID-19 numbers on Sunday, but here are the top 3 reporting states to start the week — Texas, Missouri and Arizona — relative to prior outbreaks.
Source: Bloomberg
And although the media has been talking about the case count in Florida… the state only reports weekly, making the chart look more alarming than it is.
Source: Bloomberg
When I distribute those weekly numbers over non-reporting days, here’s what we get:
Which isn’t great, but it’s not even as severe as it was in the spring. It’s almost like… vaccines work or something.
The bottom line, however, is that my perception of the delta variant is that it isn’t enough of a threat to cause a stock market crash…
And definitely not as dire as the financial media is making it out to be. BUT, my opinion doesn’t matter if the whole market panics at once.
The real concern, however, should be the economic period we’re entering…
As I said Friday, the scary word here is “stagflation.” Inflation will continue and we know economic growth is going to slow down…
That’s where we’re headed. Which is what you should be concerned about instead of a delta variant stock market crash.
Because the panic will pass.
But in these environments, you have to know what you’re doing. That means allocating a smaller portion of your portfolio to the small-cap universe.
And that’s exactly why my Fortune Research Pro members got a recommendation for a certain large-cap innovator on Friday…
One that could help you out if you want to join…
All the best,
Matt Warder
P.S. Last year, 10-time trading champion Chuck Hughes took a $4,600 starter account and turned it into $67,268.
This same strategy gave Chuck’s readers the chance to go 20 years without posting a single down year.
It was clear to us that Chuck had managed to crack the stock market code — and we wanted to learn his secret. So WealthPress Senior Strategist Roger Scott sat down with him for an exclusive interview and asked him to reveal his winning strategy…
And luckily, we got that conversation on tape.
