The Collapse In Global Stock Markets Will Continue

Wall Street Journal: The Worst of the Global Selloff Isn’t Here Yet, Banks and Investors Warn

Wall Street is only now coming to grips with the dislocation being wrought by the coronavirus.

The most brutal stretch for global markets since the financial crisis likely isn’t over yet, say investors and analysts who believe it is too early to assess the possible scale of economic damage from the coronavirus.

In just a few weeks, U.S. stocks have lost roughly a third of their value. In recent weeks, investors have even fled assets like U.S. government bonds and gold that typically do well during times of turmoil, underscoring the extent of the panic and the shock to once-robust investor sentiment delivered by the global health emergency.

But many analysts and portfolio managers warn that neither those declines nor recent extraordinary actions by the Federal Reserve are likely to signal the end of the market crunch. They note that by historical standards, stocks’ declines look modest compared with some prior downturns, given the early indications of how much damage virus-related shutdowns are likely to do to global growth. The S&P 500 is down 32% from its February peak. In comparison, stocks tumbled 57% during the financial crisis and 49% after the dot-com bubble burst in 2000 before beginning to rebound.

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WNU Editor: I am not buying the narrative that it is "too early to assess the possible scale of economic damage from the coronavirus". IMHO it is very easy to determine what the economic damage is (and will be) for the simple reason that it has already happened. This global pandemic is hitting us now, and it is going to be with us for the next year or two. The shock and trauma of what people have experienced and/or are experiencing right now is going to take a long time to dissipate. I should know because I experienced something like that when the Soviet Union imploded in the 1990s. No one thought that the economic collapse of the former Soviet Union would last for a long time, but it did. It is bad enough when you experience an economic dislocation and the hardship that it brings. It is worst when everyone around you is experiencing the same thing. This is going to be the reality for most Europeans and Americans in the coming months. No job and/or a job with limited hours. Dwindling or limited savings. And pressure from loved ones for help. In this environment the last thing people are going to be doing is investing in the stock market.

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