• Market Crumbs

Markets Set For Another Crazy Week

Image via M. B. M. on Unsplash

Last week was one for the history books as more than $5 trillion in wealth was wiped from global markets. Investors finally woke up to the realization that the coronavirus is more than just the flu and could potentially derail the global economy.

U.S. markets saw their worst week since the financial crisis, with the Dow Jones Industrial Average and S&P 500 falling 12% and 11%, respectively. The Nasdaq joined the Dow and S&P 500 in entering a correction, meaning they have all declined at least 10% from their 52-week highs. The Dow had its largest single-day point loss in its 135-year history, while falling more than 1,000 points on two separate days last week.

The rate at which the Dow and S&P 500 went from peak to correction was also historic. The Dow entered a correction at the fastest rate since just before the Great Depression, while the S&P 500 entered correction territory in the shortest amount of time ever. This marks the 27th correction for the S&P 500 since World War II. For the prior corrections that didn't turn into bear markets, the average decline was 13.7% and took roughly four months to recover.

In what is sure to receive little sympathy from the general public, the world's wealthiest 500 people lost a combined $444 billion in wealth last week. The world's top five wealthiest people lost a remarkable $36.5 billion between them.

While nobody has any way of knowing how the coronavirus will play out and the effect it will have on the global economy, and subsequently the stock market, it didn't stop a slew of individuals from trying to reassure investors.

Federal Reserve Chairman Jerome Powell tried to boost investors' confidence by releasing a mid-day statement Friday. "The fundamentals of the US economy remain strong," Powell said. "However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."

U.S. President Donald Trump's tone about the market appeared to deteriorate along with the market's returns as the week went on. Earlier in the week he tweeted "Stock Market starting to look very good to me!" while saying "The markets will take care of themselves" by the end of the week.

National Economic Council Director Larry Kudlow, who likely would never say otherwise, said "stocks looks pretty cheap to me." President Donald Trump's son, Eric, even tweeted "In my opinion, it’s a great time to buy stocks or into your 401K. I would be all in... let’s see if I’m right..."

As mentioned, no one knows how this will play out, but it is surely going to be another volatile week. Just last night U.S. index futures were all over the place with Dow futures dropping more than 500 points before rebounding and indicating a more than 200 point open. It's clear, though, that as long as markets continue to fall, the calls for central banks to intervene will continue to grow, despite still being down only about 10% from the highest level ever.

Leftover Crumbs

  • They're coming for Jack. Activist investor Elliott Management has built a roughly $1 billion stake in Twitter with the intention of replacing co-founder and CEO Jack Dorsey. Dorsey has received criticism for splitting his time between Twitter and Square, which he co-founded and currently serves as CEO. Twitter shares have equal voting rights unlike other notable technology companies, making it easier for an activist investor to push for changes. Elliot will seek to nominate four directors to Twitter's board of directors as part of its push to replace Dorsey.

  • What a time to be alive. In what may not be too surprising to some, a cryptocurrency named "CoronaCoin" has launched amidst the coronavirus outbreak. As more people die from the virus, the number of available tokens will decline, while subsequently increasing in value. The creators of the coin launched 7,604,953,650 tokens, which represents the world's estimated population. "As the number of infected/dead from the virus increases, the number of tokens are manually burned every 48 hours," CoronaCoins' website reads. "So for every one infection, one token is burned."

  • It's been a long process. The payouts to former customers of Bernie Madoff, who committed the world's largest Ponzi scheme, are approaching $14 billion. A distribution of $369 million to 854 accounts will bring the total recovered to $13.93 billion, which represents 80% of the $17.5 billion clients are believed to have lost. Following the latest payout, 64% of eligible customer accounts will have been paid in full.

  • Not everyone is happy. Yesterday, New York became the third U.S. state to have a plastic bag ban go into effect. Plastic bags will no longer be allowed to be distributed at supermarkets, bodegas and boutiques. Plastic bag manufacturers and bodega owners have brought their fight against the ban, which will be enforced starting April 1, to New York's Supreme Court. Violation of the ban will result in a verbal reprimand for the first violation, a $100 fine for a second violation and a $500 fine for a third violation. The NYC Mayor's office tweeted "Sending a big farewell to single-use plastic bags. We’ve moved on to eco-friendly reusable bags and we’re not looking back."

  • Riding a Harley into the sunset. Another day, another CEO exit as Harley-Davidson announced Matthew Levatich is stepping down as CEO and will leave the company's board of directors. Board member Jochen Zeitz will temporarily serve as CEO until a permanent replacement is found. "The Board and Matt mutually agreed that now is the time for new leadership at Harley-Davidson," Zeitz said in a statement. Harley continues to struggle with sales as its core customer base is aging and younger people are not as interested in the company's motorcycles.