Deciding that cash-is-king, Wall Street traders continued to dump stocks and gold today, with the deadly coronavirus AKA SARS CoV-19 or Covid-19 ravaging financial markets. No scientist or government health official can say with any certainty how long the virus will stick around, some estimates now say well into the summer. Wall Street sells on uncertainty, taking the Dow Jones Industrials down 1,338 point or 6.3% to close at 19,898.92. Since the Dow’s Feb. 12 record high 29,551.42, the blue ship average has fallen 33%, or at midday today 40%. Shuttering business large-and-small, schools, entertainment venues, etc., urging citizens to “shelter-in-place,” has ground the economy to a halt, forecasting recession in 2020. President Donald Trump, whose main selling point is his management of the economy, now has his reelection bid thrown into the air, with odds makers saying it’s 50/50.
Most U.S. citizens dealing with the drastic change inlifestyle are not focused on politics but on surviving, preventing themselves and their families from getting the novel coronavirus. Watching Wall Street crumble, long-term investors can only sit back and wait for a day when the market comes back. Day traders and short sellers have seized the market, churning profits for the nation’s biggest funds, while long- term investors watch their portfolios shrink. Federal Reserve Board Chairman Jerome Powell raised the alarm March 15 when he slashed the Federal Funds Rate to zero, pulling out all-the-stops to prevent the economy from crashing into another Great Depression. Wall Street doesn’t like the uncertainty, not knowing when SARS CoV-2 will start to level off. All the Centers for Disease Control can do is give citizens away of minimizing the damage, not stop the outbreak.
Knowing the Covid-19 pandemic could go on for months or a year is no reassurance to traders, busy trying to figure out a future bottom. New York University Stern School economist Nouriel Roubini thinks there’s another 20% or more to the current Wall Street meltdown. If the virus goes on longer than July or August, the damage could be far worse. Getting some clues from U.S. Surgeon General Jerome Adams, it looks like things could get worse before turning a corner. “Fifteen days is likely not going to be enough to get us all the way through,” Adams said on NBC’s Today Show. putting Wall Street on notice that this could go on longer. Adams said U.S. health officials are working to “flatten the curve,” help decrease the rate of infections in the country. Until Wall Street gets some reliable guidance on the end of the crisis, markets will continue to sell-off.
Looking for anything positive, Wall Street has no way to estimate the duration of the downturn, certainly not when a bottom has been reached. “We really need to lean into it now so that we can bend the curve in the next 15 days, and at that point, we’ll reassess,” said Adams, letting markets know things could get worse. Adams thinks the next 15 days could be “a critical inflection point” about where SARS CoV-2 pandemic goes. Adams encourages state officials to order “shelter in place” if they feel it can slow the community spread of the virus. “There is no longer doubt that the longest global expansion on record will end this quarter,” JPMorgan economist Bruce Kasman wrote on Wednesday. “The key outlook issue now is gauging the depth of the duration of the 2020 recession. No one in the financial sector, including the Federal Reserve, can predict the course of a virus outbreak.
Dealing with unprecedented events isn’t easy for anyone, especially for financial markets that want certainty to plan investment strategies. Losing another 1,338 points today, the Dow and other market averages including the tech-rich Nasdaq and S&P 500, continue to drop in value. Circuit breakers to halt selling kicked in today in all three markets. It didn’t reassure markets when Canada closed its border with the U.S., raising concerns about bilateral trade relations. Canada reported 58 new Covid-19 cases for a total of 656 cases and nine deaths, small by U.S. standards but alarming. White House officials have worked feverishly with Congress on a $1 trillion stimulus package to help reassure Wall Street and give consumers the cash needed to spend in the consumer economy. But as Adams says, it’s going to be difficult for consumers to rescue the economy when restaurants, bars and entertainment venues are closed.
Reports by the U.S. Department of Health and Human Services that the pandemic could last 18 months “or longer and could include multiple waves of illness,” do nothing than sow more panic in the public. London’s Imperial College predicted that as many as 2.2 million Americans or 700,000 Britons could die, compared to the 127 and 104 recorded to date, if more draconic steps are not taken. British Prime Minister Boris Johnson did an abrupt about-face for his plan to allow more infections to cause a “heard immunity” in the U.K. With most U.S. and European cities shut down, it looks like a national holiday, suppressing foot-and-automobile traffic. Adams urged the U.S. to press ahead like Italy with quarantining the entire country. With Italy’s 4,207 new Covid-19 cases and 2,978 deaths, Italy’s along way from slowing the virus, with new cases rising at an alarming rate..
