This is a good teachable moment as they say. Today the jobs report was very strong, much better than expected yet the stock market fell. Of course, everyone knows why it’s the coronavirus. However, many times the stock market falls on good news and it is not nearly as clear as to why.
It is all about the future. If investors and traders feel the future is in jeopardy, or that they just can’t tell what the future will bring, then they begin to fear to own stocks. That fear could be caused by many things, but it all boils down to the earnings. If it is perceived that earnings are going down there will be downside pressure on stock prices. If they feel they are going up, then upside pressure. It is pretty simple. Today, we see the fear of the unknown and unknowable. Will this virus hurt earnings and by how much? The answer is yes it will impact earnings, but no one knows how much.
Just a reminder there are only two emotions that matter in the stock market ‘Fear and Greed’. The market swings back and forth between these two. We just have not seen fear in a long time.