[Market Madness] Edition 0071
Surge and Selloff
Today of all days
Well folks, we’ve been through this rodeo multiple times, but today was the day that rising cases spooked market participants once again. The past few days, starting with the weekend, have been spike-days for new COVID 19 cases in the ‘hot spot’ states here in the states. Today, we are seeing some potential consequences within the markets for these ‘out of hand’ case levels. With a slight bump in volatility (as seen in the VIX), we could see a few more bumpy days this week as investors and the markets work to make sense of this latest step in the recovery.
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Fundamentals
Wednesday Close:
Dow Jones Industrial Avg: -2.71%
S&P 500: -2.58%
NASDAQ: -2.19%
US 10 YR: 0.695%
Crude OIL: $37.82
Market Madness Portfolio: -1.86%
COVID 19 Global Cases: 9,450,092
Indices Overseas:
FTSE 100: -3.11%
Nikkei 225: -0.065%
Hang Seng: -0.50%
TEDRATE: 0.14
LIBOR (3 month): 0.29688%
You can guess what this article is about
The big news again today is the surging case levels of coronvarius here in the states and abroad. 33 states have seen a higher 7-day average than in the prior two weeks. Market participants are spooked and have since began selling positions in riskier assets. Today’s decline does not hearken back to earlier plunges, but are still serious feelings felt by investors with respect to the global progress for recovery. Overseas, we saw major indices lose as well, given the new spikes in cases in Beijing and Seoul.
I’ve been doing a lot of catch-up with my former professors this week. It has been great to reconnect and make sure everyone is safe. It has also been great to absorb their takes on what is happening in the world and particularly with respect to the economic and finance lenses of the story. Essentially, I’ve gained the sense that we are in a world of hurt all around. Given such high unemployment, and a basic standstill of production and enterprise, it only makes sense to reason that GDP is going to be down in the dumps for a while.
There have been a few sparks of hope within the mostly extinguished economic flame. Looking at the financial markets, it would appear that there is more good than bad — a tale with a dangerous assumption. With this ‘second wave’ of cases, it could be likely that major industry sectors must grapple with the decision of having to once again close shop and quarantine. A second major period of economic closure would likely realize the “W-shaped” recovery path that has been recently tossed around. Of course, no one wants to see this — as has been mentioned by Treasury Secretary Mnuchin; a second economic shutdown would be a fatal blow to the world economic system.
What we are seeing is akin to (as so eloquently described by Professor Snyder) ‘wack-a-mole.’ Attention is put on areas where there is a spike, a containment effort is put in place, and the same process is repeated at each new spike zone. Unfortunately, there is not too much else that can be done until a definitive cure is realized, and that reality still looks far in the distance.
We are still seeing a lot of news and blame being put onto novice retail investors who have been moving markets up recently. As we discussed in the past, this makes price movements difficult to read from an economic outlook perspective. These market moves also put these retail investors into a risky position, betting on companies that are either declaring bankruptcy, or are not meeting the underlying financials necessary to see a modest rise in share price in the future. But it is also worth mentioning that these investors are truly voting for company success with their dollars. How far will that take these investors? No one really knows.
Quick Takes
WHO says that COVID 19 has not reached its peak. (via CNBC)
Cold email help. (via CNBC)
Treasury may further delay Tax Day to September 15, according to Treasury Secretary Mnuchin. (via CNBC, headline only)
New York, New Jersey, and Connecticut imposing 14-day quarantine for anyone traveling from ‘hot spot’ states. (via CNBC)
U.S. COVID 19 acceleration. (via WSJ)
GNC to close 200 stores amid bankruptcy filing. (via Business Insider and CNN Business)
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