On February 19th, 2020, the S&P 500 closed at 3,386. It might have traded above that at some time before or after, but it was near its all-time high. On Friday, March 13th, it closed at 2,711, having bounced back up 9.29% since the previous day. The index was off by almost exactly 20%, in under one month.
Where to from here?
The US Federal Reserve, headed by an attorney named Jay Powell, nominated by President Trump after the tenure of Janet Yellen, Ph.D., is taking aggressive action. It has been cutting interest rates. The most recent act, reported today, involves lowering its policy rate to near zero and buying $700 billion worth of debt instruments. The latter response is described as Quantitative Easing (QE), and it is not clear if it is still categorized as an unconventional tool like it was when utilized by Ben Bernanke, Ph.D.
All of these matters are associated with an outbreak of the covid-19 illness. Efforts to contain it have been thwarted and it is now a pandemic. However, aside from certain industries such as cruise ships and airlines, and soon to include others such as arenas (such as MSG), it is not clear that there has been direct impact yet. Grocers, pharmacies, and some healthcare companies, may experience a simultaneous acceleration in results.
Markets have been anticipating serious problems. The Fed is not acting alone in its attempt at monetary stimulus. The Bank of Japan is holding an emergency meeting. There are also simultaneous, or coordinated actions by the Bank of England, Bank of Canada, Swiss National Bank, and European Central Bank. New Zealand’s central bank is also reported to have lowered interest rates.
Particularly if global bourses keep crashing and matters worsen, there would be support for an opinion that Powell has acted for naught, or too soon. Contagion is killing some people and non-pharmaceutical interventions, isolating and quarantining those infected, are the only remedies currently known to be available. Commerce slows and stops, supplies become unavailable, and customers stop patronizing businesses. If there is a recession (which probably would not be labelled until sometime in the future), or worse, the scenario could be further complicated if markets have stopped responding to central banks.
S&P 500 futures are off by close to 5%, having triggered an after hours “limit down” mechanism, at about 6 pm Eastern time, that is intended to reduce panic. The volatility appears to be in response to the weekend actions of the US central bank. Indeed, there has subsequently been an 8 pm Democratic presidential debate, an activity that typically affirms the worthiness of societal processes, the type of thing that markets may like.
There is no reason to vouch for the stock market currently. No guarantee is being made here. One might look for a clear indication that it can bottom. Until then, risky assets can be avoided.
The author still owns shares of (VOO), but may sell…It is not a good time to own stocks, nor is it a good time to sell them.
3/17/20 What may happen here is the market bounces. The background situation is somewhat different than in January of 2016, when the S&P 500 corrected while China’s currency declined. Once the devaluation or depreciation was over with, the market signaled a bottom as described by a noted financier,
“Not a good entry point, because normally you recover 1/3 to 2/3 of the loss…If you have a real bottom, it is always retested. Not a time to buy, but for those left to sell.”
It seems what might happen here is that the market will regain 1/3 to 2/3 of the loss. It could then decline and retest the bottom, which would be current levels (around or under 2,400). My intent is to unload somewhere above 2,600, or at about $250 price of VOO, before it may decline to retest. There may not be a hurry to sell recently acquired shares of Harley-Davidson, even if the market’s actual bottom is lower.
3/18/20 Doing some selling of VOO.
3/19/20 With news that General Motors and Ford are idling plants, it seems a similar decision could be in the works for Harley-Davidson. The author has sold some stock in the company.
Where to from here?
The US Federal Reserve, headed by an attorney named Jay Powell, nominated by President Trump after the tenure of Janet Yellen, Ph.D., is taking aggressive action. It has been cutting interest rates. The most recent act, reported today, involves lowering its policy rate to near zero and buying $700 billion worth of debt instruments. The latter response is described as Quantitative Easing (QE), and it is not clear if it is still categorized as an unconventional tool like it was when utilized by Ben Bernanke, Ph.D.
All of these matters are associated with an outbreak of the covid-19 illness. Efforts to contain it have been thwarted and it is now a pandemic. However, aside from certain industries such as cruise ships and airlines, and soon to include others such as arenas (such as MSG), it is not clear that there has been direct impact yet. Grocers, pharmacies, and some healthcare companies, may experience a simultaneous acceleration in results.
Markets have been anticipating serious problems. The Fed is not acting alone in its attempt at monetary stimulus. The Bank of Japan is holding an emergency meeting. There are also simultaneous, or coordinated actions by the Bank of England, Bank of Canada, Swiss National Bank, and European Central Bank. New Zealand’s central bank is also reported to have lowered interest rates.
Particularly if global bourses keep crashing and matters worsen, there would be support for an opinion that Powell has acted for naught, or too soon. Contagion is killing some people and non-pharmaceutical interventions, isolating and quarantining those infected, are the only remedies currently known to be available. Commerce slows and stops, supplies become unavailable, and customers stop patronizing businesses. If there is a recession (which probably would not be labelled until sometime in the future), or worse, the scenario could be further complicated if markets have stopped responding to central banks.
S&P 500 futures are off by close to 5%, having triggered an after hours “limit down” mechanism, at about 6 pm Eastern time, that is intended to reduce panic. The volatility appears to be in response to the weekend actions of the US central bank. Indeed, there has subsequently been an 8 pm Democratic presidential debate, an activity that typically affirms the worthiness of societal processes, the type of thing that markets may like.
There is no reason to vouch for the stock market currently. No guarantee is being made here. One might look for a clear indication that it can bottom. Until then, risky assets can be avoided.
The author still owns shares of (VOO), but may sell…It is not a good time to own stocks, nor is it a good time to sell them.
3/17/20 What may happen here is the market bounces. The background situation is somewhat different than in January of 2016, when the S&P 500 corrected while China’s currency declined. Once the devaluation or depreciation was over with, the market signaled a bottom as described by a noted financier,
“Not a good entry point, because normally you recover 1/3 to 2/3 of the loss…If you have a real bottom, it is always retested. Not a time to buy, but for those left to sell.”
It seems what might happen here is that the market will regain 1/3 to 2/3 of the loss. It could then decline and retest the bottom, which would be current levels (around or under 2,400). My intent is to unload somewhere above 2,600, or at about $250 price of VOO, before it may decline to retest. There may not be a hurry to sell recently acquired shares of Harley-Davidson, even if the market’s actual bottom is lower.
3/18/20 Doing some selling of VOO.
3/19/20 With news that General Motors and Ford are idling plants, it seems a similar decision could be in the works for Harley-Davidson. The author has sold some stock in the company.