The Crisis Is Not As Predictable As The Previous Cotton Market Recovery.

A well-known cotton industry in the US recently analyzed that all the attention of the market is concentrated on the new coronavirus. In the first inaugural address of a Federal Reserve Chairman, he said, "the only thing we have to fear is fear itself." He meant, of course, to revive the economy after the great depression. Today, it will apply to the ultimate impact of the virus on the global economy. In the past two months, the news of 24 hours a day, 7 days a week, has made this fear panic.

The longest bull market in the US stock market can be traced back to 2009, but it was completely over last Wednesday. The Dow Jones index changed from a record high to a bear market with only 19 trading days. Historically, a similar decline took 136 days on average. In the past 11 years, the market has been startled, such as the European debt crisis, China's economic recession and the recent trade war. Every time, the US economy has resilience.

Fortunately, the US economy is still healthy, the unemployment rate is the lowest in more than 50 years, wages have risen, consumer spending has increased and interest rates are very low. If it can be maintained and the outbreak time is short, the market is likely to rebound quickly.

However, if the virus is not treated for a long time, its impact will be serious. It may take years to restore a vibrant economy into a major global recession. We are experiencing something that we have never seen before. Although there are many uncertainties, one thing is for sure. Global business is hindered, and its real consequences are yet to emerge.

Unfortunately, the cotton market is more reflective of the stock market than any other farm product. Shares fell 20% and cotton prices fell 10 cents. Cotton prices are not subject to setbacks, unlike corn and other cereals, which are economically driven. Although we all have to eat, we don't need to buy a new blue jeans. This is one reason why the cotton market has turned a blind eye to strong fundamentals.

Looking ahead, the short-term outlook is the simultaneous exchange of cotton and stock markets, which is quite disturbing in an extremely uncertain environment. In the past recession, the government will eventually intervene in monetary policy with a view to stabilizing the situation. In my view, 2008 is a good example. Although there must be such an attempt, do not expect similar success, because it is not a financial crisis, but a medical crisis.