Bloomberg reports One of the Best Years of the Bull Market Was Just Erased in S&P
The S&P 500 rose almost 29% over the course of 2019, good for the second-best year of the bull market. It took a little under four weeks to fall apart.
A rout that reached 11% on Monday briefly pushed the benchmark to 2,402, below its level of two New Years ago. Even after paring the decline at midday stocks were down more than 20% this year.
Extreme investor anxiety was on display on Monday after the second emergency Federal Reserve cut in two weeks proved too little to comfort investors obsessed with the coronavirus and its effect on the economy. The CBOE Volatility Index, known as the fear gauge, jumped as high as 76.4, just shy of its highest level since the 2008 financial crisis.
Not only was 2019 erased, at least momentarily, the entire rally since Trump took office is at risk.
Mike “Mish” Shedlock
After today, we’re back to just above the 5/15/17 close on the S&P500. Another 9.3% drop (to about 2164) wipes out the entire Trump bull run since election day.
A couple of people I spoke to recently are echoing CNBC whining anchors and calling for the markets to close for 2 weeks. Markets are not supposed to decline after all, yes?
Before markets are closed for a long time, officials will first declare a ban on short selling in order to force the markets higher.
That’s all of a drop?
The market may fall further, but once the coast is clear, there’s going to be a hell of a rebound. I suspect oil will be over $60 before years end.
Possibly.
But prior recession lasted 19 months. This will be worse even if virus slackens next month or so. Too much leverage in system and everything priced to perfection. There WILL BE a lot of delinquencies / defaults. Will take time to work thru.
When do you expect the “coast to be clear”? A vaccine is expected in 12-18 months. That should do it, but that’s still a long way off.
Hoped for. At the earliest. Not “expected.”
Vaccines for Coronaviruses haven’t exactly proven to be easy to develop, so far.
OTOH, the sheer effort this one is, and looks set to be, stimulating; may be able to brute force the “mythical man month” thesis into bending a bit.
Sometime in the next 3 months would be my guess. Countries can’t be shut down for longer than that.
Or rebound, then re-crash, then rebound, then re-crash…
The big news out this weekend that may have gotten lost in the shuffle. The big banks foregoing stock buybacks. If they pull back, I imagine most other large corps do the same. Cash at a premium and doubt business would expend their credit lines on buybacks. The optics would be poor and banks would probably yank them if it became trend.
The big banks in the US are currently yielding over 3%. Which is great compared to current treasury rates. And if they use their money on dividends instead of buybacks, the yield will be even more.
There’s always risk, but I don’t see any circumstances where the big banks will fail. Or be allowed to fail.
Long ago I bought a stock solely on yield (Ford @ 6%), made it through ONE dividend payment before they slashed.
XOM has a trailing P/E of 11 and a dividend yield of 9.8%.
Oil will not be <$30 forever.
I agree. The oil price drop is because the Russians refused to cut production so it’s a game of chicken between the Saudi’s and Russian’s that everyone is losing. I suspect cooler heads will prevail.
Oh no, the poor “investors” being treated like savers for one year out of last 11. The entitlement mentality the fed created with moral hazard is staggering.
After moar than a decade of simply printing hundreds of trillions of dollars and using it to buy stocks covertly has all but petered out, the Fed has gone full blown Kamikaze and is hell bent on “printing ” the “market” back to records highs while the underlying (private sector) economy has virtually (permanently) collapsed on it’s ass shows how desperate and delusional CB’s have become.
“is hell bent on “printing ” the “market” back to records highs”
If wishes were horses pigs would fly…
“After moar than a decade of simply printing hundreds of trillions of dollars and using it to buy stocks”
If that were true prices would be out of sight far above what they are today The Fed can always lie about their balance sheet but the banks can’t make 96%+ of M1 money demand deposits disappear without an uproar from the populace.
So disappointing. So many level-headed people warned of the danger for so long (Hussman! lol). All these people who rode the market up for the last 10 years now seem to be calling for the end of free markets.
One more term and I will make the stock market great again.
I made 28% on Bonds in 2019. My bonds continue to outperform my stock portfolio which got moved to 75% cash a few weeks ago. My forecast is Dow 15000 and S&P 2000 when this is all said and done. The Fed can set rates to 0 instead of a range and still get rates lower. The treasury could issue a statement on the 10 year bond and move it lower as well. It hasn’t been tracking the Fed cuts very well. Banks will be made whole but the recession will be deep. GS is forecasting -5% GDP.
“My forecast is Dow 15000 and S&P 2000 when this is all said and done.”
Meaning to say we will get there in weeks. After all, 20% down does not take too long nowadays. More so, inter-meeting rate cuts are things of the past now.
“The treasury could issue a statement on the 10 year bond and move it lower as well”
…
The Treasury Department has ZERO control over interest rates. Mr Market (and helping hands of central banks) determine rates. The only thing Treasury can do is decrease / increase supply of 10 yr notes, which Mr Market will take into account.