Years of Gains Lost in Moments!
Circuit breakers were triggered again yesterday as the S&P 500 tumbled 12%, its furthest in a single session since the crash of 1987. The virus being an “act of God” and stimulus failing to slow the sell-off, some are calling on unbelievable measures. Mother Nature is winning!
The CBOE Volatility Index (the VIX) is Wall Street’s fear gauge. It normally hovers around twenty, but spikes during market panics. It touched 82 at yesterday’s close, a fear reading just shy of 2008’s record of 85.
The International Monetary Fund (IMF) has newly promised to lend one-trillion-dollars to ailing economies. Congress is expressing support for thousand-buck helicopter payments for all American adults, and the Federal Reserve has issued its emergency rate cut to near zero.
Such decisive action either resembles leadership if it makes stocks go up or foolishness if they keep spiralling downward. It’s certainly not a good idea to spam markets with stimulus. No immediate increase in investor confidence doesn’t make it worth risking a fiscal overdose. This pandemic will subside, and then the bull could go mad. A delayed fuse, if you will.
Some have suggested that like stadiums and non-essential stores, markets should also close to protect investors from volatility. Pff. No way. These choppy waters are a trader’s dream, and price discovery in markets is critical at a time like this. There’s new news every day, and asking stock prices to catch up with those headlines at a reopening would make for a financial earthquake!
Volatility is the cost of admission into markets, and investors remain free to enter and exit as they please. The government can’t hold our portfolios hostage or even flirt with the thought, lest everyone will sell, running on assets as liquidity appears under threat.
It seems much more likely that markets will remain open. In which case, get ready for the bailouts, and get trading!
