Get Ready: Zika Virus to be Blamed for Market Crash!

Sunday, August 7, 2016
By Paul Martin

Superstation95.com
Aug 07, 2016

As fear mounts around the global impact of Zika, one of Wall Street’s most closely followed bulls has an ominous message about how the health crisis could impact markets in the weeks to come.

As U.S. health officials move to halt the virus’ spread in Miami, where the disease has raged for weeks, markets have been surprisingly placid in the face of the growing health crisis. Based on previous circumstances, however, Canaccord Genuity’s chief market strategist told CNBC that could easily turn on a dime.

“When we study 2014, we were dealing with many of the same issues that had yet to cause a correction,” Tony Dwyer said this week.

In 2014, the S&P 500 index experienced a sharp and sudden correction, and according to Dwyer, many of the same ingredients that contributed to the turmoil are bubbling beneath the surface of the current rally. Those factors include persistent fears about the Federal Reserve’s next policy move, a weak euro zone and falling oil prices.

Two years ago, “the straw that broke the camel’s back was the first confirmed case of the Ebola virus in the U.S.,” Dwyer said.

The analyst added that in October of 2014, stocks were trading near all-time highs amid low volatility. But that was before the Ebola crisis helped trigger a deep slide in U.S. markets. Ebola fears help shove blue-chip and tech shares into correction territory that year.

“The only thing scarier than your own health fear is that of your children,” noted Dwyer when discussing how a health scare has the ability to shake investor confidence. Zika is a particular concern for pregnant women, who may give birth to children with birth defects if exposed to the virus.

As it stands, Dwyer has been calling for a market correction since turning neutral on U.S. stocks back in mid-July. Noting that stocks have floated in a historically narrow range, Dwyer said a blitz of earnings results, economic data and global central bank meetings have yet to push the market out of its comfortable range — or lead to a sharp downturn.

Dwyer went on to say that perhaps Zika — compounded with Italian bank issues, a potentially more hawkish Fed and energy price weakness — could be enough to spook investors. The risk factors may cause a correction similar to the one that occurred around the Ebola scare, he added.

The strategist noted the first U.S. Ebola case was reported on September 30, 2014. From there, the S&P 500 slipped 1.7 percent off its peak. By the time the third U.S. case was diagnosed, the market was already down 7 percent.

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