Good morning. One word to sum this all up... unprecedented.
The wildest market in history. Another word that sums up the last few weeks... surreal.
having the qualities of surrealism; bizarre.
"a surreal mix of fact and fantasy
never done or known before."the government took the unprecedented step of releasing confidential correspondence"
In the span of just a handful of weeks the stock market went from fresh record highs to lows not seen since.... the end of 2018.
In 2000 and 2008 it took years for the market to fall from highs... ....this time its been weeks. This collapse has got us back to prices from just over a year ago? Does that mean we haven't fallen enough? Or that the recent 15 months of upside was too far too fast?
Perhaps these weeks of selling will morph into months of continuous selling sending us back down to where we started in 2000 and 2008?
To think that we've seen the ugliest market since the dawn of man... and we couldn't even break the December 2018 lows? Cue the thinking emoji......
In December 2018 the market fell seemingly every day. It wasn't until Christmas Eve 2018 until the market decided to reverse. It wasn't as historic a decline as we've seen the last few weeks, but it was one that signaled to many that the bull market was over. Growth was done. And the market had finally topped. I'm sure so many feel that way now. That the market is DONE. Those that came back after 2000 and 2008 may finally throw that towel in.
Fast forward a year. It's December 2019 the market is hitting fresh all time highs on almost a daily basis. Trade war news, Middle East conflict, among many excuses to sell, continue to get shrugged off.
Even this new Virus in China we are slowly hearing about is not bothering the market. The dire twitter posts of people just collapsing in the street did not seem to bother the market one bit.
China shutting down Wuhan? Shoulder shrug.
But the cracks were slowly forming.
Then on February 20th.... in the early afternoon... with the SPY just off fresh all time highs and trading around $338.... it dropped $3 in the span of 30 minutes. Heavy selling out of no where. No news. No exuse. Just downside. That was ominous.
Of course $3 of downside in minutes today is about the norm. But less than a month ago it was abby-normal. The market ended up recovering much of those unexplained losses... but that was the beginning of the nastiest decline the market has ever seen in such a short period of time.
The Virus has ended up doing the unthinkable. Shutting down the entire Global Economy. The implications of which no one really knows for sure.
Fear is at all time highs. Panic has gripped the world. And the stock market has been gyrating around like it has never done before.
Yesterdays near 3,000 point decline on the DOW was the largest EVER.
And this came the day after the FED dropped its Funds rate back to zero and pledged some $750 billion of QE.
In 2009 this helped bottom the market... in 2020 it preceded the largest market rout in history. Clearly participants are spooked.
There was a lot of fear in 2008 as well. The financial markets were broken. And no one knew if they would ever get fixed.
This time around the market has no idea the extent of the damage this Virus will cause. Will the world ever be the same again? Will the markets ever go up again?
Yes and Yes.
I know the old adage.. be greedy when others are fearful. I don't know that we are there yet. Could this be just leg 1 of two or three more legs lower for the market?
It's possible. Remember in 2008 we didn't bottom because of the small windows people had to exit funds. The selling came and went, howver it wasn't done in 2 weeks.
My humble thoughts?
Those a long way from retirement , even if this market has more downside to go, will likely look back years from now and wonder how they were able to get some of these companies so cheap. Those with a shorter term time frame and not willing to risk more losses should likely rethink their investments.
This market collapse is like a forest fire. It hurts. It causes pain. But years down the road that forest is greener, healthier, and more wonderful than it ever was. We got a nasty forest fire. The flames are still burning. The smoke is thick. But we are going to get through it. No doubt about it.