Betashares Australian Equities Strong Bear Hedge Fund [ASX:BBOZ] is up close to 1% today, and 27% since it hit $8.14 on 20 February. At time of writing, the exchange traded fund is trading at $10.34.
What’s going on?
BBOZ is a fund designed to increase when the market falls. A 1% decrease in the Australian market should see a 2–2.75% increase in BBOZ. And the same is true vice versa.
As the coronavirus is top news and the outbreak keeps spreading, so is fear.
There are now over 3,000 coronavirus recorded deaths, and over 89,000 cases.
The — economic — concern here is that the virus could bring the world economy to a standstill. There are already travel restrictions, quarantines, and disruptions to production and the supply chain.
The virus has already paralysed the second largest economy in the world, China. And it’s now spreading to other areas.
Markets are now waking up to this fact, and they are collapsing.
The S&P/ASX 200 Index has plummeted over 10% since 20 February, wiping all gains since June last year.
The Dow Jones and S&P500 are also on a free fall.
As stock markets collapsed, BBOZ has been making gains.
What happens next?
Markets have been on a free fall but this may not last, as governments are looking at bringing in some more incentives.
It’s the case of some of the most affected areas. Italy is already looking at introducing company tax credits and Hong Kong is looking at giving all permanent residents cash.
Both the Reserve Bank of Australia and the US Federal Reserve are already talking about cutting rates.
We could be due for a rebound.
But with fear spreading and debt at record highs, it may be a case of sell the rally instead of buying the dip.
Editor, The Rum Rebellion
PS: In his free report Five Stocks to Sell Now, Rum Rebellion editor Vern Gowdie lists five stocks he thinks you should definitely get rid of. To download the report, click here.