If President-elect Biden shuts down the US economy, the Dow would drop nearly 4,000 points: strategist
The last thing bullish post-election season investors want to see is a nationwide lockdown to control the resurgent coronavirus under President-elect Joe Biden.
“3,000 or 4,000 [Dow] points lower at least,” veteran strategist David Nelson of Belpointe Asset Management told Yahoo Finance Live on the market reaction to a possible lockdown.
But that may be what investors are staring down the barrel of if COVID-19 infections and deaths continue to rise ahead of Biden assuming power in late January.
Influential COVID-19 adviser to president-elect Joe Biden Dr. Michael Osterholm told Yahoo Finance Live a four- to six-week national lockdown would be appropriate to get the pandemic under control. Osterholm contends the U.S. has a “big pool of money” to pay for lost household wages from any lockdown. The payments to households would continue as a vaccine for the deadly disease is rolled out across the country.
Explained Osterholm, “We could pay for a package right now to cover all of the wages, lost wages for individual workers, for losses to small companies, to medium-sized companies or city, state, county governments. We could do all of that. If we did that then we could lock down for 4 to 6 weeks.”
Investors haven’t taken Osterholm’s comments or the notion of a lockdown too well at all.
The Dow Jones Industrial Average plunged more than 300 points on Thursday, while the Nasdaq Composite and S&P 500 remained sharply lower. Investors booked post-election profits in cyclical and value stocks. In turn, they plowed back into stay-at-home stocks such as Zoom, Snap and Slack.
“The markets wouldn’t like that [the lockdown]. I don’t think the markets are pricing that in at all. This is not new from the Democratic side of the aisle,” added Nelson.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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