A couple of points of perspective to this very hectic open to the US stock markets:
- There are comparisons today and the past two weeks to the 2008-2009 financial crisis. The US stock markets were most volatile n Fridays and Mondays throughout late 2008 with financial institution failures that took place over or near weekends – Bear Stearns, Lehman Brothers…and then Merrill Lynch.
- Please keep in mind that extreme market volatility was due to news flows that made it difficult to predict what would happen over a weekend (on Fridays) …and then the reaction to the weekend news (on Mondays).
- There are also comparisons today to the very sudden and shocking September 11th event in 2001. The markets immediately plunged down, were closed for several days – and then began a recession in the US. Keep in mind that in 2001 the “dot-com” bust was still very fresh.
- Today there is a NEW factor: a freefall in the price of oil. The price decline is taking place based on a high-level fight between Saudis and Russians about oil supplies and prices. This crisis began late last week and was exacerbated over the weekend. This is a NEWLY intensified factor today in the US stock markets equation.
- Oil is a large, large component of US and global stock indexes and is partly leading to market weakness globally.
- There are now fears of a coming recession in the US – and globally – factoring in China’s economy that is linked to the world. However, this belief is speculation, and the severity of a recession is even harder to predict. The underlying US economy before the start of the coronavirus was at its strongest in several respects since the 1960’s (wage growth, employment). This statement is based on economic data that was reported just this past Friday. (Remember the Friday-Monday concept? See above.)
Day-to-day moves in the stock market can be stressful or taken as part of “what markets do”. Please stay in touch with any questions and comments. With perspective and patience, we will get through this series of shocks to the markets.
Thank you for reading and please stay in touch.