When the coronavirus appeared in China, the government had the ability and did shutdown China. It was hard for the people, but for a country which has spent the last 20 years with great growth rates, the effect has very tough economically. There was good news, the pollution levels in China went down and that is a good thing. The bad thing was the economy was down, in an article by Nathan Vanderklippe of the Globe and Mail – fixed asset investment for January and February was down 24.5%; industrial production was down 13.5%; automobile output was down 46%. Retail sales was down 20.5%, new property starts was down 45%; 5 million people lost their jobs and unemployment rose to 6.2%.
China was the first country to experience the virus and is depending on exports and sales to bring things back to normal. The problem with exports is given the effects on the virus to the countries where the goods are sold, at the moment only specialized exports are needed.
Linking to dividend paying stocks, often times these companies unless they have a monopoly like situation such as utility, have diversified revenue streams. For example, P&G has 20 products which typically bring in $1 billion for each item. Will they take a hit, yes, but people still need to use the products think Tide, Crest, Olay, Pampers and the list goes on. The downturns test us to ensure personally we are reasonably diversified in our outlook. As an investor, downturns offer quality companies at a discount. If you can nibble away to buy more, because when the normalcy of the world comes back, quality stocks will tend to lead the rebound.
There are more questions than answers, till the next time – to raising questions.