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Coronavirus: Market Watch

A Guide To Volatility

At a time filled with so much uncertainty, it is critical to remember the following mantra: DO NOT PANIC! DO NOT PANIC! DO NOT PANIC!

Say it with me, one more time. DO. NOT. PANIC.

The last few weeks have been nothing short of chaotic due to the outbreak of the novel coronavirus (COVID-19) which has swept the globe, infecting over 108,000 people with more than 3,400 deaths. Currently, with more than 500 confirmed cases and 22 deaths in the United States we have moved past containment and have been told to be prepared for disruption to our daily routine.

What does this mean?

It is possible you may have to work from home, and in the event you are exposed to the virus, feel sick or are near someone exhibiting signs of illness, be prepared to self-isolate for up to 14 days. This means having enough food and supplies on hand to cover every member of your household in the event you can't leave. Here is a short list of items to give you an idea of what you should have in case of an emergency or quarantine:

  1. Bottled Water (1 gallon per person for each day you plan to be quarantined)
  2. Anti-Bacterial Hand Soap
  3. Medical Supplies (contact lenses, contact solution, hearing aid batteries)
  4. First Aid Kit (bandages, disinfectant)
  5. Prescription Medication (30 day supply) plus any OTC (over the counter) meds you might need like Advil, Tylenol etc.
  6. Canned Foods (meat, vegetables, in liquid that can be used for cooking)
  7. Cereal, Rice, Beans, Oats (oatmeal, grains)
  8. Batteries
  9. Chocolate or some type of alternate sweet (studies show the importance on maintaining optimal mental health)
  10. Latex gloves, N95 face masks (respirators)
The New York State Department of Health has set up a toll free hotline to address all issues related to the novel Coronavirus and can be reached at (888) 364-3065.

You can also follow the latest news regarding Coronavirus in New York state here.

Why does this seem so bad?

Lack of preparation, transparency from the CDC, clear direction from the government, and a President who fails to inspire confidence in the American people has caused panic across the country in the form of unnecessary hoarding of household supplies like toilet paper and bottled water, xenophobic discrimination and hate crimes against people of Asian descent. It has also rocked the global financial markets as traders desperately seek answers and a bottom to the rout.

By 10pm EST yesterday, it was clear that the world was in for another rough week. U.S. Stock market futures were down near 5% overnight which triggered a halt in trading. Over the years, certain measures were put in place designed to prevent panic from tanking equities markets and give investors time to digest the latest market news. Historically, it has worked exactly as intended and is a critical tool in times of great volatility. The Dow Jones Industrial Average (DJIA) was down 1,200 points in pre-market trading and global markets were in a free-fall for the rest of the night.

And then the market opened......

For the first time since 1997 trading was halted on the New York Stock Exchange this morning for 15 minutes following a 7% drop in the S&P 500. The Dow Jones Industrial Average (DJIA) was also down over 1,900 points when the 'circuit' was broken. Designed to prevent a free fall in equities, 3 "circuit breakers" were put in place in the event certain benchmarks were hit, the first of which occurred at 9:35am EST (only 4 minutes after the opening bell!). Trading resumed at 9:49am. If stocks continue to fall and hit a 13% drop for the day, another 15 minute pause will take place. In the event that stocks retreat more than 20%, the market would be closed for the rest of the day.

Oil War For the Ages??

More bad news originating from last week's failed OPEC+ alliance meeting sent oil prices plummeting as a price war broke out in Riyadh. Saudi Arabia has announced a massive price cut for their oil, while sources claim they plan to simultaneously increase production to more than 10,000,000 barrels per day with the possibility of exceeding 12,000,000 barrels on some days. This "Shock & Awe" tactic is a desperate attempt by the Saudi's to increase marketshare worldwide. In response, Russia has indicated they will also increase their production to maximum levels. And the price war has begun.

The last time a price war this serious broke out was during the first Gulf War in 1991. As of the opening bell this morning, the price of a barrel of oil dropped more than 30% ($27).

What does this mean for the west?

Quite possibly the end of the U.S. Shale market, for starters. With the price of oil below $30 a barrel, oil wells in West Texas are now operating at a loss.

Since 2014 the price of oil has been subject to wild volatility as the west became one of the largest exporters of shale oil in the world and price manipulation out of Saudi Arabia saw the price of oil drop from $100/barrel to less than $40. Despite a few brief periods of upswings, it still has not returned to normal levels and is showing no signs of recovery.

Now What?

It is important to remind yourself that things will get better. Do not panic. Life will get better, the world will come to its senses and you just have to give it time.

Hang in there.

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