• Market Crumbs

RIP Bull Market: 2009-2020

Image via NeONBRAND on Unsplash

It's getting tougher to emphasize how bad the moves in the market over the last few weeks have been with each passing day. The sheer velocity in which markets have gone from all-time highs to plummeting is unprecedented.

Following in the footsteps of the Dow Jones Industrial Average, which ended its 11-year bull market by entering a bear market on Wednesday, the S&P 500 and Nasdaq did so as well yesterday, officially closing the book on the longest bull market in U.S. history.

The three indices fell about 10% each, with the Dow and S&P 500 posting their worst days since the infamous "Black Friday" market crash in 1987. The Dow's 9.9% decline marked the fourth-worst single day percentage loss in the index's history, while the 2,352.60 point loss broke the record for the largest single-day point loss, which was set on Monday.

For the S&P 500, it marked the fastest move from an all-time high to a bear market in history, doing so in just 16 days. Previously, the fastest move was in 1929 during the Great Depression when the S&P 500 went from an all-time high to a bear market in 42 days.

The swift move from all-time highs to where the indices currently stand has left most investors and traders simply speechless. The Dow is now down 28% from its all-time high, while the S&P 500 and Nasdaq are both down 27% from their respective all-time highs.

Following an emergency interest rate cut last week and subsequent boosts to the size of its repo operations on both Monday and Wednesday, the U.S. Federal Reserve once again tried to calm markets yesterday.

The latest move from the Fed will see them inject $1.5 trillion into the financial system. The Fed will widen the scope of its $60 billion Treasury purchases to include bills, notes, Treasury Inflation-Protected Securities (TIPS) and other instruments. The purchases began yesterday and will extend through April 13. The Fed also announced it will embark on a $500 billion three-month repo operation and a one-month operation. Finally, the Fed will continue to offer $175 billion in overnight repos and $45 billion in two-week operations.

"These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak," the New York Fed said. Markets initially spiked on the news before giving back all of the gains and subsequently making new lows.

"We are going into a global recession. We are going to see a spread of economic sudden stops," Allianz chief economic advisor Mohammed El-Erian said. "The trouble with economic sudden stops is it’s not easy to restart an economy. You’ve got to get people to reengage. You’ve got to coordinate the restart. The economic damage is going to last."

El-Erian believes financial markets will react more quickly than the real economy, but believes the markets could fall 30% from their highs first. "We are putting so much liquidity into these markets that when the green light flashes, and it will flash at some point, we are going to have such a snap back," El-Erian said. "The financial markets are going to lead the real economy."

The last few weeks have been devastating for many who were invested and got caught off guard. Markets are facing the most pressure since the financial crisis and where they go from here is anyone's guess. The fact that they continue to shrug off actions by the Fed may mean it's only a matter of time before they follow in the footsteps of Japan and support equities by purchasing ETFs or outright purchasing shares.

Leftover Crumbs

  • 12-18 months is a long time. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said human trials to test a coronavirus vaccine could begin "within a few weeks." "I would hope within a few weeks we may be able to make an announcement to you all that we’ve given the first shot to the first person,"Fauci said. Fauci believes a vaccine for the coronavirus could be ready for the public within 12 to 18 months.

  • Modell's is closing its stores. Modell’s Sporting Goods officially filed for Chapter 11 bankruptcy and will close the last of its 115 stores. A spokesperson for Modell's said the company currently has 3,623 employees. Modell’s will begin liquidating stores today with the help of Tiger Capital Group, which previously oversaw the liquidation of 19 of its stores. Modell's was founded in in 1889 and grew to a chain of more than 150 stores throughout the northeastern U.S.

  • Will they ever IPO? Airbnb has seen bookings in major cities drop significantly since early January as the coronavirus cripples global travel. According to AirDNA, bookings have fallen 96% in Beijing, 71% in Shanghai, 46% in Seoul and 41% in Rome from the beginning of January to last week. "We know that COVID-19 will have an impact on this in the near-term, but we also know that travel is resilient and will rebound," said Airbnb in a blog post. The company has previously said it hopes to go public this year.

  • Juul co-founder is out. James Monsees, one of the co-founders of Juul Labs, is stepping down as an adviser and board member of the company that has been plagued by troubles over the last year. "Building this company alongside all of you has been the single most rewarding experience of my career and perhaps my life," Monsees wrote in an email to employees. Juul CEO K.C. Crosthwaite said Monsees was "instrumental in building this company from the ground up."

  • The box office is no longer number 1. Despite worldwide box office revenue hitting a record $42.2 billion last year, consumers still prefer to watch content from the comfort of their homes. Sales of digital media—which includes streaming subscriptions and online purchases of content, hit $48.7 billion last year, a 24% increase from 2018. The 24% annual growth in digital media sales far exceeds the 1% growth seen at the box office. "The film, television and streaming industry continues to transform at a breakneck pace — and as this report will show, audiences are the big winner," said Motion Picture Association CEO Charles Rivkin.