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March 26, 2020–3.28 million Americans apply for unemployment last week
In a much-anticipated report that came out today, it’s been confirmed that a record-setting 3.28 million Americans applied for unemployment benefits during the week of March 15 to March 21. This is highly-concerning for the state of the economy, and the number is worse than many experts feared. In fact, economists that were polled by MarketWatch were expecting a “terrible” number of 2.5 million.
So this is a lot worse.
The article states that this “sudden surge in claims is likely just the beginning. Waves of fresh layoffs are expected with many states ordering nonessential businesses to close.”
Markets Close On an Upswing
The markets had another excellent day today, as we saw the three major indexes close in the green. The Dow finished +6.38%, the S&P 500 finished +6.24%, and the Nasdaq finished +5.59%.
Ironically, the market boom was led by some disturbing news that included significant amounts of people applying for unemployment (see the point above) as well as coronavirus cases increasing to the point where the United States now has the most cases in the world.
On a positive side, a stimulus bill was approved by the Senate that is going to do a lot for the economy (hopefully), including delaying student loan payments, extending unemployment benefits, giving loans to small businesses and incenting them to keep their staff employed, as well as putting cold hard cash in the hands of Americans.
More to come as this develops, but it was definitely an odd day in the markets today.
March 25, 2020–Another positive day in the markets
The Dow Jones Industrial Average posted another positive gain on Monday, finishing up 495 points (+2.4%) to close the day at 21,200. This is a breath of fresh air for most investors who were panicking last week as the Dow dipped well below 20,000 for the first time in a long time.
The S&P 500 also had a positive finish, ending the day up 1.2%, while the Nasdaq finished in the green as well, up 0.5%.
While not massive gains, it was a sign that the market was moving in the right direction, at least for the day. A lot of this was driven by positive news of a stimulus package being finalized, though it’s still going back and forth to secure bipartisan support.
The bill is expected to give as much as $1,200 for adult Americans who qualify, so it’s easy to see why the markets were reacting positively.
March 24, 2020–Dow closes with biggest one-day percentage gain since October 2008
The Dow rallied today as it finished up over 11%, marking its biggest one-day climb since 2008. This comes at a critical juncture since last week the markets got beaten down, and the Dow fell below 20,000 points.
Today’s rally was a result of a few major happenings:
- Hopes for a stimulus bill. The government is still working to finalize a stimulus package that, among other things, would put extra cash in the pockets of most Americans. Speaker of the House Nancy Pelosi said that there is real optimism to reach a bill with bipartisan support soon.
- Rebound for hard hit sectors. Airlines, cruise lines, and casinos all rebounded today, and in a major way. American Airlines, for instance, finished up 35.80% while Norwegian Cruise Lines finishing up over 42%.
- Virus cases grow. Cases of COVID-19 in the United States, Italy, and around the world have grown, yet President Trump has said he wants the United States back open by Easter. While this may be totally unrealistic, it seemed to have instilled some confidence in investors.
March 18, 2020–The Market Experiences Another Tailspin
There was a stop in training during the morning after a 7% decline – which seemed to shock investors. Once trading resumed, things started to spiral. The Dow dropped 6.3% today–falling more than 1,300 points. The blue-chip index dropped about 2,300 points at its lowest point in the day as well. The S&P 500 dropped 5.2%, while the Nasdaq took a 4.7% hit. A big driver of this continues to be the coronavirus, and specifically worries from Americans on how bad it’s getting, since the government is working on passing a bill to cut a stimulus check to citizens.
Tesla Employees Still Show Up
Despite many companies like Apple and Google telling their employees to go home (and work from home if they can), Tesla’s CEO Elon Musk tweeted a few weeks ago “The coronavirus panic is dumb.” It seems as if that attitude spread through his company, as he, as well as other Tesla employees, showed up to work at the company’s factory in Fremont. Keep in mind there’s currently a Bay Area-wide shelter-in-place order, which puts Musk and Tesla in a precarious position.
Sick Leave Bill Passed
The Senate successfully passed a bill that would ensure paid leave benefits to quite a few Americans as the coronavirus epidemic continues to disrupt the labor market. The legislation now goes to the President for implementation. The effort, which was earlier approved by the House of Representatives, secured bipartisan support. However, lawmakers are currently creating brand new legislation to try and save the overall economy, which is yet another indicator showing exactly how quickly the economy is degrading.
Ford and GM Halting Production
Ford, General Motors, and Chrysler are all planning to stop production at all of their factories in North America for at least the next two weeks in order to help slow the spreading of COVID-19. While Ford and GM will be completely shut down, it’s unclear on how Chrysler will handle this, as they might rotate people in and out or only shut down certain areas at certain times. Regardless, this doesn’t exactly help an auto industry that has already been struggling.
Delta Cutting 70% of Flights
Delta’s CEO told employees to brace for rough times ahead, as the company has decided to cut 70% of its domestic flights and 80% of its international flights over the next 2-3 months. Delta’s stock price is getting pummeled, falling more than 30%. Delta is also proactively encouraging its employees to take voluntary leave.
March 17, 2020–Dow Closes Up Just Over 5%
After taking another beating yesterday, the stock market rebounded on Tuesday, with the Dow closing just over 1,000 points. After a scary morning (the Dow dropped below 20,000 around 10:30) things quickly rebounded on hopes of a government-supported stimulus checks going to people, deferral of tax payments, and the stock market staying open, among other news.
The Dow is still down about 28% from it’s February high, though, and it seems like things will continue to be volatile for a while.
Coronavirus Stimulus Checks?
There are real fears that this recession could cut hit harder than the Great Recession of 2008 (but hopefully not last as long), which is why the government is supportive of cutting checks to citizens as part of a broader stimulus package. Claudia Sahm, an economist and one-time top Fed staffer said that Congress needs to “go big, and they need to go now,” and that she does not “want to see anything less than $1.5 trillion” in funding for this.
March 16, 2020–-Dow Closes Down 13%
After a nice gain on Friday in response to a bill being signed into law by President Trump that brings over $8 billion in various aid to tackle the coronavirus, the market fell back into a panic on Monday, dropping close to 13%.
The Dow closed 2,997.10 points lower (12.9%), which is now the biggest one-day drop since Black Monday in 1987. Crude oil fell below $30 a barrel and plenty of other industries got slammed. As one example, Apple had one of its worst days ever, also dropping close to 13% as it decided to close its stores. In fact, 64 different S&P 500 stocks fell more than 20% today.
After-hours trading looked a little more promising, but I don’t think we’ll be seeing another day like Friday soon.
The Philippines Closes Their Stock Market
The Phillippines indefinitely stopped all stock, bond, and currency trading on Monday. They’re now the first country to shut down their financial markets due to COVID-19. While certainly controversial, experts wonder if other countries might follow suit and close down their financial markets during this crisis. The New York Stock Exchange (NYSE), however, has already issued statements saying that they’re planning to stay open.
10-Year Treasury Yield Tanks, Too
The 10-year Treasury yield dropped 22.4 basis points on Monday–which is the largest single-day drop since March of 2009. The 2-year Treasury rate fell 12.4 basis points and the 30-year bond yield dropped 22.2 basis points. As a reminder, Treasurys are government-backed securities that typically provide a solid, safe return.
A few things are happening here, though. The Federal Reserve announced this past weekend that they’d be taking a series of measures to restore the functioning of the Treasurys market. For several weeks, the Treasury market has been hit due to a lack of liquidity.
And as you’ve probably seen, rates were cut by the central bank a full percentage point to between 0% and 0.25% to support economic growth during the COVID-19 outbreak. On top of that, the Federal Reserve said that starting today, it would begin buying at minimum, $500 billion in Treasurys and $200 billion in mortgage-backed securities over the next few months.
All of this should be good things for the Treasury market–yet it still dropped today. It’s unknown why exactly this is, but some experts think that there needs to be an even more aggressive attempt to limit the spread of COVID-19. Things like unemployment insurance and guaranteed paid time off are still being worked through, which is having an impact on all the markets, including Treasurys.
Odds are you’re not deeply invested in Treasurys, but it’s a good market to follow since it really is the safest investment you can make. So if this market is dwindling, what does that mean for the rest of the markets?
March 13, 2020–President Trump Declares a National Emergency
Other points taken from President Trump’s news conference on Friday afternoon:
- The emergency declaration will open up to $50 billion in aid for coronavirus response.
- More than 1 million coronavirus test kits are expected to be available in the U.S. next week and as much as 5 million available within the next month.
- Effective immediately, borrowers paying back federal student loans will only be paying on the principal. No interest will be collected.
- A website is under construction and will reportedly have information on drive-thru coronavirus testing though it’s not yet known how soon it will be available or which markets/areas it will serve.
House Speaker Nancy Pelosi announced an agreement with the Trump Administration to pass the Families First Coronavirus Response Act. Main purposes of the Act are to make coronavirus testing free, give workers sick pay, fund unemployment benefits, and expand food programs.
One of the biggest surprises today, the Dow and S&P 500 climbed up 9% just one day after one of the biggest drops in history.
March 12, 2020–Dow Closes Down 10%
The Dow closed down 10%, the largest one-day drop since 1987. Fears of the coronavirus continue, as investors become more and more bearish. One industry that was hit particularly hard today was the airline industry–with the three biggest airlines all seeing double-digit declines in their stock price today, marked primarily on the news President Trump released last night (bans on international travel to more than 20 European countries).
There still seems to be a mixed reaction. Some investors are selling and getting out while they can (though I do NOT recommend this) while others are staying put and reacting in a more pragmatic way. Several comments on CNBC Live today mentioned that this horrible drop will be over in a matter of months, but it could take three to five years for the market to make a full recovery.
If we truly are waiting three to five years for a recovery, make sure you’re focused on the long term. For example, one analyst talked about Disney’s stock getting absolutely crushed. It could be in for a further decline if Disney does decide to close its parks. But you’re not buying Disney stock now to flip it in a day or even a few months. You’re buying it for the long haul. So think about what Disney will be worth in three to five years, and make your decision based on that.
(For the record, I’m not “recommending” buying Disney, though it’s not a terrible stock. If the price dropped a bit more, I’d consider it an above-average pick for myself).
March Madness Gets Canceled
This was the last shoe to fall of the major events happening around this time of year. March Madness, the NCAA national championships for college basketball, happens over the course of three weekends and is a multi-billion dollar event, which is why it took so long to make the decision.
Major schools like Duke and Kansas said they wouldn’t participate, so the decision was made to just cancel (previously, they’d decided to play the games in front of no fans–which frankly would have been odd).
While this doesn’t have a direct tie to your finances, it’s a MAJOR indicator that things are a lot worse than we may have thought. When March Madness gets canceled, billions upon billions of dollars are left on the table.
Outside of the revenue generated from the games themselves, you have concessions, ticket prices, advertising, and local businesses/economies benefitting from the games being played. This could have a ripple effect on other industries, which remains to be seen.
March 11, 2020 – The Bear Finally Arrives
The Dow has officially hit a bear market–meaning there’s been a 20% drop from the index’s peak–as of today. The Dow hit its high on February 12th and has skyrocketed downward 20% in a month, primarily on fears of the coronavirus (which was just declared a pandemic by the WHO). In addition, this decline was one of the fastest in history. There’s also no sign of a rebound in the near-term, as the S&P 500 has also hit a drop of 19% since it’s high on February 19th, and things are looking even more bleak for the spread of the virus. Not to mention it’s an election year, which always causes stock market disruptions.
Tax Filing Deadline Likely Being Pushed Back
While the market is tanking, President Trump continues the response to the virus across the country. And according to the Wall Street Journal, the IRS is likely to delay the April 15 tax filing deadline as part of a broader fiscal stimulus effort. According to the article, “The Trump administration plans to delay the April 15 tax deadline for most individual taxpayers as well as small businesses as part of an effort to mitigate the effects of the spread of the novel coronavirus.”
Our Reaction to the Coronavirus
Come on, you’ve seen the social media posts of people emptying stores of toilet paper. You’ve also probably experienced a friend or family member beginning to panic over the virus (if you haven’t yourself). In an article on the World Economic Forum, an expert in human behavior explains our reaction to coronavirus, and it’s quite interesting. For example, the data shows that at least two times as many people are likely to be infected by someone with HIV/AIDS, smallpox, polio, mumps, and SARS as the coronavirus–yet this seems to be the most panic we’ve seen in a long time.
March 10, 2020—Managing Wall Street’s Rollercoaster Ride Safely
And we’re back! But not really. Wall Street rebounded early this morning with a rally that saw the Nasdaq Composite rise 2.7%, the S&P 500 gain 2.9%, and the Dow Jones uptick of 800 points or 3.3%, led by energy stocks. Investors are breathing a little easier as President Trump announced plans yesterday to introduce an economic stimulus plan designed to help American businesses recoup losses due to Corona-linked market disruption. Market makers, such as JP Morgan, assure clients that the dip was the result of investors succumbing to an existential panic that was distinct from market realities. And then our blue skies were gone as quickly as they came, with the Dow wiping out a 30-stock gain that hit 945 points later this morning before dropping 122 points.
Market Volatility Is Not Recovery (And Investors Know It)
President Trump’s stimulus plan, due to be presented at a White House briefing today at 4:40 PM EST, is relatively undefined, with President Trump stating that it would likely provide a payroll tax cut but providing few details on further market supports. Serving as a singular bright spot on the horizon, the proposal failed to reverse hours of market volatility.
The sense of gloom was a common thread during investor earnings calls, as companies acknowledged the possibility that market uncertainty would continue and attempted to shift investor focus towards the market’s potential recovery. Bea Ordonez, CFO of OTC Markets Group, a marketplace for OTC securities, told investors during an earnings call that the potential for a global downturn means that the company “would expect our clients to be impacted, our uses to be impacted, and for there to be some downstream impact to our financial results as well.” Skittish investors mean a reduction in overall trading volume and that would impact related service providers like OTC Markets Group.
Analysts Are Gloomy but Not Hopeless: Here’s Why
Analysts are also pointing to a projected halt in global growth as a reason for the market’s wild ride. “We now forecast a 1Q20 stall in global GDP growth, representing the first time global growth has stalled outside of a recession,” according to Bruce Kasman, Chief Economist, J.P. Morgan. Add to that the announcement that Saudi Arabia, the world’s largest oil exporter, is going to add (forgive us) gasoline to the oil-price war by boosting production to record levels in April, and you might think global analysts would declare (forgive us again) an all-out fire sale. But they haven’t, at least not yet.
We are in a volatile market, agreed. That isn’t necessarily a reason to hide your money under the mattress. That’s because leading market watchers also believe that we don’t yet have definitive proof that we’re all doomed. While JP Morgan predicts, for example, the Corona virus will impact airline equities in the short term, it is likely that it won’t be a “fundamental event” for the airline industry, permanently diminishing its status as a viable investment area.
According to Dr. David Kelly, Chief Global Strategist for JP Morgan, while market volatility linked to pandemic fears “is a sober prospect, it is also important to recognize that, in time, a combination of more widespread immunity and a better medical response should cause the impact of COVID-19 to fade, allowing the economy to rebound. Investors should also recognize that fast-moving markets will already have reduced their exposure to equities and increased their exposure to bonds, a trend that will, at some point, argue for a rebalancing back towards equities.”
In addition, a recent report by McKinsey states that governments and investors should not assume the worst is coming, as a “range of outcomes” is possible. Governments are already taking drastic measures to curb economic shocks. As investors see that the sky isn’t falling just yet, it is possible that the markets will become less erratic.
Another Reason to Be Hopeful
Yesterday the SEC introduced a proposal to simplify crowdfunding for businesses. That means even if the market is a nausea-inducing rollercoaster ride, smart startups and agile companies can still get access to capital and build value. That means that irrespective of the volatility of the markets, there may be long-term investment opportunities that will be available to savvy investors and start-up friendly funds.
How to Weather the Ride Today
First, breathe. Markets have been through worse. Second, get a top-down view of your assets and income using the right financial management tools. Use a commonsense investment strategy that focuses on incremental value rather than quick-n-easy stock fire sales that may (or may not) pan out. Writes JP Morgan strategist Dr. David Kelly, “For investors, like Costco shoppers, the goal should be to have a portfolio that can protect and sustain in a downturn but also thrive in better times when they arrive.”
March 9, 2020— A 7% fall of the S&P 500 triggered a circuit breaker on Monday, causing stock market trading to halt for 15 minutes. Growing coronavirus fears and concerns about an oil price war between Saudi Arabia and Russia are the main culprits today. Reportedly, the oil price plunge is the largest one-day dip since the 1991 Gulf War.
What does today’s market-shock mean for investors? Lower oil prices mean cheaper gas prices at the pump. But in regards to the stock market, it could get worse before it gets better. Some experts believe market volatility will continue for another two weeks. Read our previously published story below for more information on coronavirus impacts.
A few months ago, word of a new virus began to spread. Today, the coronavirus is making headlines and causing worldwide fear of a new pandemic.
In another topic taking over the news, we’re seeing the stock market tank. Is it coincidence or is the coronavirus really causing the markets to go wild?
It seems as if the virus is, in fact, also infecting the markets. But how long will it last? Let’s unpack the virus and discuss its effects on the stock market this week and moving forward.
It seems as if the coronavirus has hit its peak (or at least we can hope) in China, but more people are growing worried as the virus spreads to other countries, including the United States.
And it’s no secret that coronavirus is freaking investors out, as proven by the major slides this week in the stock market.
As of Thursday’s market close, the drop in the market ranks in the top 15 for the Dow Jones’ most significant drops during a week–dropping 11.13%. For comparison, the worst weekly drop ever was in 2008, which was 18.15%.
This also marks one of the worst weeks ever for the S&P 500 and the Nasdaq. The S&P is down 10.80% this week, making it fall in the top 20 all-time worst slides for the index, while the Nasdaq is down close to the same (10.55%), marking its 7th worst of all time.
Why Is a Virus Impacting the Stock Market?
You have to remember that there are a number of factors that can influence stock market ups and downs. And a global pandemic like coronavirus is just one example.
The director of the National Center for Immunization and Respiratory Diseases at the Centers for Disease Control and Prevention, Dr. Nancy Messonnier, stated this week, “we really want to prepare the American public for the possibility that their lives will be disrupted because of this pandemic.”
Following that comment, President Trump held a news conference to address the coronavirus and says the United States is prepared for anything to happen. Vice President Pence is now leading a coronavirus task force to help mitigate the spread of the virus in the United States.
So, the drops in the market are most likely related to people’s worries about what the virus will do to the economy, if anything. If businesses are shut down and the virus spreads, that’s no good for the economic climate.
Washington Post columnist Michelle Singletary even polled several certified financial planners and certified public accountants who indicated that “the dives are more about people’s fears than the facts.”
What This Means for Investors
Obviously, most investors are going to see a pretty hefty decline in their portfolios. And this might continue for a while–depending on how the fears of the virus are managed over the next several weeks.
But for most investors, it’s not time to sell everything. In fact, many of you can recall what happened in 2008 when the Great Recession pounded the stock market and the people who panicked and sold their equities ended up kicking themselves when the market rebounded like crazy.
So my advice is to not panic and sell with emotion. Use logic. This applies even if you’re retired or on the cusp of retirement. Be patient.
Yes, you should be concerned about how this will impact businesses, particularly ones that operate in China or areas where the virus is spreading widely. But that doesn’t mean everything has to stop and you should empty your portfolio of stocks for cash and bonds.
In fact, one CFP even said “…it’s like when her father was teaching her to drive and cautioned that if she started to lose control of her car in bad weather, she should steer into the skid.”
What Investors Should Watch For (and Do)
First, pay attention to the news and the markets. If you’re close to retirement or retired, you might want to have a shorter leash on how quickly you make investment decisions and how long you let the drops play out. But, I would still caution you to BE PATIENT.
If you’re nowhere close to retirement, I would look at this as a great opportunity to invest more. That’s what I’m doing. While others are panic-selling, you could be swooping in and scooping up stocks on the cheap.
Also, know what is actually impacting the market.
2020 is an odd year. There’s an election this year, which is always known to impact the stock market, as well as general fears of a recession. So the ups and downs you’ll see in the coming months may have nothing to do with the coronavirus at all. Again, watch the news and follow the markets.
Other Tips to Weather the Storm
Here are some other tips to help you weather the storm (or at the very least, help you feel better about what’s going on):
- Ensure you’re diversified. Make sure your portfolio is broadly-diversified. If you have mutual funds or ETFs, you’ll want to have different types of stocks and sectors included. If you invest primarily in individual stocks, I would recommend at least ten different stocks from a diverse set of industries.
- Look for stocks that pay dividends. I’m a value investor, so I might be a little biased, but now isn’t the time to roll the dice on a tech company that’s bouncing up and down (see: Tesla). Find strong companies that pay dividends. In other words, follow Ben Graham’s advice.
- Go heavy in U.S. stocks. Normally I’m a huge fan of international investing, but right now I would go heavy on U.S. stocks. Especially ones that don’t have a ton of business in China.
How the Market Has Behaved During Similar Pandemics
The most well-known pandemic related to the coronavirus that most people think about was SARS. The market dropped significantly during that time, but just a few months after it became less of a global worry, the market rebounded around 20%.
Now, there were other factors at play, such as the Iraq invasion and the start of what was going to be a multi-year economic expansion. But even considering some other factors, it’s clear to see that the market corrected itself once fears subsided.
While I wouldn’t rely on past history to predict what will happen with coronavirus, it’s at least a data point to tell us what might happen–a downturn and a correction. So frankly, I wouldn’t be surprised to see another 5-10% decline, but would also expect a full correction by the end of the year after the election.
So what’s the answer? In short, the virus is causing people to worry, which is, in turn, impacting the financial markets.
While you have every right to worry about the virus, don’t panic-sell your stocks. You could very well regret it once the market eventually corrects itself. It might take some time, but history tells us that it will.
And if you can stomach it, it’s a great time to buy.