Stock markets around the world have undergone an unprecedented coronavirus-induced panic over the last two weeks, with the leading Dow dropping 3,000 points on March 16, marking its worst decline since 1987.
It is getting so bad, that the New York Stock Exchange said that starting March 23, it will temporarily close its historic trading floor and fully move to electronic trading, CGTN.com reported.
The move came after two employees tested positive for coronavirus. No one knows what will happen in the future, but some investors have already suffered a lot.
Apple, Bank of America and Coca-Cola are Buffett’s top three holdings, which have all performed poorly during the past few weeks, the report said.
Among these, Bank of America is in an extremely tough situation due to the economic downturn, since banks must take on a lot of responsibility for easing monetary policy, the report said.
The Federal Reserve also announced that it was cutting rates to zero, marking the second coronavirus-related emergency rate cut, which means that in the future, banks are not easily going to achieve post-earnings growth for the duration of the bear market.
Besides this, as travel restrictions and a fear of flying hammer demand, Berkshire’s stake in Delta Air Lines also shrank in value by at least 40%, the report said.
During the past, Buffet has invested through the likes of the Black Monday decline in October 1987, the Internet bubble, the Great Recession and the subprime mortgage crisis.
Over the past seven decades, Buffett has built up a net worth of around US$80 billion, and helped to create in excess of US$400 billion in value for shareholders of Berkshire Hathaway stock, the report said.
He is good at translating short-term pain into long-term gain. His success came from researching a handful of sectors, picking out businesses with perceived competitive advantages and hanging on for the long haul, the report said.
The US equity markets are also influenced by other factors such as the ongoing oil price war between Russia and Saudi Arabia.
The premier of oil-rich Alberta, Jason Kenney, even warned Albertans that sue to collapsing petroleum prices, the nation could be entering a new “1930s era.”
As a famed investor, can Buffett continue his investment legend?
It should be noted that before the stock market crashed, he warned that the US stock market was ridiculously overvalued, the report said.
Legendary investor Ray Dalio also said his hedge fund Bridgewater “didn’t know how to navigate (the) coronavirus stock-market selloff and should have cut all risk but failed to react.”
Dalio’s macro fund has lost 20% so far this year as of last Saturday.
Doubtless, the global economy is facing the very real prospect of a recession on the back of coronavirus devastation — and that might even be the best case scenario for investors.