A few thoughts:
The global economy was already awash in unprecedented amounts of debt and weakening markedly in 2019.
We now have twin supply and demand shocks from the coronavirus lock-downs, and a spin-off oil-price war between Saudi and Russia pushing us into a deflationary spiral.
Central bank interventions do not seem to be doing much to lift the markets.
This means that we may now be predominantly reliant on governments to backstop vast swathes of the real economy and hopefully in so doing quell some of the panic in the markets.
For most of the world the social and economic dislocation from the pandemic is only just getting underway. Unless the pandemic fizzles unexpectedly, this means that there is likely to be more bad news than good moving forwards.
This suggests to me that further losses and crazy volatility are likely in the stock markets. Even if the coronavirus does not prove terminal for the global financial system via a colossal credit crunch, 2020 may well be an inflection point, after which nothing is ever quite the same again, economically and socially.
“A pandemic-driven global recession is becoming more likely by the day as the flow of goods, services and people face ever-increasing restrictions and financial markets slump…
“The virus “has disrupted the global economy and has quickly morphed into a dislocation in financial markets too,” Morgan Stanley economists led by Chetan Ahya said in a report to clients in which they warned of a “rising risk” of a full-blown global recession.”
“Market researcher James Bianco calls the Federal Reserve’s move to pump $1.5 trillion into the market the “nuclear option” to calm investors gripped by coronavirus fears.
“Only, it didn’t work Thursday.”
“Panic over the coronavirus on global financial markets amid the biggest market crash in a generation [the worst, one-day fall since 1987] has forced the US central bank to inject trillions of dollars into bond markets
“…in a dramatic attempt to prevent a repeat of the 2008 credit crunch.”
“The stock market’s “fear gauge” has spiraled toward levels not seen since the financial crisis…
“…a fiscal meltdown isn’t out of the question amid ballooning corporate debt.”
https://www.ccn.com/the-stock-markets-fear-gauge-is-flashing-an-eerie-financial-crisis-echo/
“The S&P 500 suffered its quickest descent into a bear market on record, taking just 16 sessions as a combination of fears stemming from the coronavirus pandemic, oil price plunge and a global recession killed off an 11-year bull market.”
https://www.ft.com/content/d895a54c-64a4-11ea-a6cd-df28cc3c6a68
“Raters are eyeing possible downgrades to junk for about $100 billion of bonds from the weakest investment-grade rated firms — well short of the $270 billion of high-grade securities that already trade at speculative-grade levels, according to Bloomberg Intelligence research.”
“Investors are racing to protect themselves from the risk of corporate defaults as uncertainty intensifies over the economic implications of coronavirus, sending the cost of credit insurance to levels not seen in the US for eight years.
“With credit markets reeling from the widening outbreak and an oil price war that has raised questions over the health of energy companies, trading in credit default swaps has been elevated and prices have soared.”
https://www.ft.com/content/f013c18e-649c-11ea-b3f3-fe4680ea68b5
“The outlook already was getting cloudy for corporate credit heading into the coronavirus scare. Just four of the 53 sectors that Moody’s analyzes had positive outlooks, while 15 were negative, the worst increase in the latter category since the financial crisis.”
https://www.cnbc.com/2020/03/12/bonds-the-credit-markets-are-signaling-that-a-problem-is-afoot.html
“The Bloomberg’s propriety Fear and Greed indicator — a gauge of buying strength to the selling strength — of the Nifty 50 index shows a negative reading of 1,813 after the record 8.2% decline in a single day on Thursday.
“The current reading of the Bloomberg Fear and Greed index is worse than negative 1,445 during the global financial crisis in January 2008.”
“…volatility across Wall Street has seen trading volumes for older Treasurys slump even in the U.S. bond-market which is advertised as the deepest and most liquid safe-haven asset in the world.
““I have never seen moves like this in 35 years of trading. I’ve never seen anything like it. At this point, the market will get absolutely exhausted,” said Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.”
“The coronavirus crisis is proving more of an extraordinary situation than the banking crisis, Chancellor Angela Merkel said on Thursday, adding that her government’s focus now was not how its budget works out.”
“India’s central bank and government will need to raid their policy toolkits to respond to a myriad of global and domestic risks threatening an economy in the grip of a prolonged slowdown.
“On top of the coronavirus outbreak and the oil-price crash, India was rocked last week by the biggest bank rescue in its history.”
“Oil fell a third day as the horror show for crude investors continued on Friday amid panic about evaporating demand from the coronavirus pandemic, with Brent set for its biggest weekly loss since 1991 and U.S. crude heading for its worst week since 2008.”
“…in the United States, it’s more than just a travel ban that will hit oil demand.
“A full-on panic has set in, resulting in daily household items being out of stock in most stores and online–including hand sanitizer, antibacterial soap, and toilet paper. This is people preparing for hunkering down, checking out, and avoiding crowds.”
https://oilprice.com/Energy/Energy-General/The-Real-Oil-Demand-Shock-Is-Yet-To-Come.html
“While this crisis is different in its origins from the last one, it is following a similar cycle of collapsing consumer and stock market confidence, leading to a spiraling down of demand, growth, employment and incomes.”
https://www.nytimes.com/2020/03/12/opinion/coronavirus-economy.html
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