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QQQ (Nasdaq 100) @ $215 QQQ3 (Nasdaq 100 x 3) @ $1890

March 2, 2020


It’s early days to call them great battles but two serious skirmishes are under way on planet earth against a common enemy. On the grand scale we have the human race versus a virus; on a smaller but still significant scale we have the Wall Street bull market versus COVID-19. As a lifelong optimist my view is that the good guys are going to win and it is only a matter of time before COVID-19 is toast.

Less dramatically I think we are already seeing signs that the economic threat posed by the coronavirus, more specifically the disruption caused by the efforts to prevent it spreading rapidly, is not going to cause a bear market. It has already caused a correction but even there I think we may have seen the worst.

Human beings are incredibly resilient and ingenious. GIve them a problem and they are great at finding solutions and because COVID-19 poses a global threat the attempts to find solutions, quicker and more effective tests, better treatment for those with severe and critical effects and ultimately a vaccine are happening worldwide.

People look back to the Spanish flu in 1918 and think this virus could be as bad. I think that is unlikely but then I didn’t expect a pandemic, which is now widely feared by experts. I do think for the stock market it is not a total game changer partly because it has so obviously come out of left field. Companies may make less money in the short term because of the coronavirus, in fact we know they will because global giants like Apple and Microsoft have already said so but are either of these businesses or any others a jot less impressive because of a virus – obviously not.

I don’t see Warren Buffett selling his Apple shares because of a short term disruption to supply and demand so why would anyone with a long-term investment perspective sell anything because of a virus. I think people will (a) try to tough it out and (b) expect shares to rally strongly and the bull market to resume the minute we can see light at the end of the coronavirus tunnel.

Apparently China and Singapore, admittedly both rather authoritarian states, are already having considerable success containing the virus.

This is what Apple CEO, Tim Cook, had to say four days ago:

“Apple CEO Tim Cook recently shared his thoughts about the recent COVID-19 virus in China. In an interview with FOX Business, the Apple executive revealed his optimism on the country’s current condition. Cook believes that things would soon go back to normal.
The numbers are decreasing by the day, and it feels like China has the outbreak under control, the Apple CEO said. Cook also noted that Apple suppliers in the region are back to their operations and are starting to increase production. In fact, he said that the suppliers of the key components of the iPhone in China are on their third phase of returning to normal and phase three on increasing production.

A week earlier, the Cupertino tech company warned that it might not be able to meet its guidance for the upcoming quarter because of the epidemic. Since the outbreak of the deadly virus in China, Apple has seen billions wiped off its value, according to NBCNews. China contributes around 20 percent of the total iPhone sales of the company.

Additionally, 50 percent of the company’s product build happens in China. But, in his interview with Fox Business, Cook underlined that the company gets parts from anywhere in the world. He also added that Apple is in great shape; that the long term prospects remain excellent, that the company is now able to open its own stores in India without needing a partner and will open the first one in 2021 and that the lower share price means the company will be able to buy shares more cheaply in its buyback programme. All in all he doesn’t sound too worried by the coronavirus.

I with him, which hopefully will not prove to be famous last words so I think it makes sense to invest in ETFs which track the Nasdaq 100 right now. Depending on your risk appetite you can buy QQQ, which tracks the index or QQQ3 which amplifies movements up and down on a daily basis, is extremely volatile but historically has delivered great long term returns.

It has felt painful while it was happening but so far the virus looks like a blip on the Nasdaq 100 chart shown above and I think it is going to stay that way. We are in a secular bull market inspired by globalisation and a technology revolution, which I believe is even more significant than the industrial revolution. US shares are going higher, maybe miles higher and that makes ETFs tracking the NASDAQ 100 timely to buy after the sell-off.

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