Two epidemics combine to make for a ‘dangerous time for the stock market,’ Nobel Prize–winning economist warns

https://www.marketwatch.com/story/two-epidemics-combine-to-make-for-a-dangerous-time-for-the-stock-market-nobel-prizewinning-economist-warns-2020-03-10

Coronavirus panic, stunning market declines fan recession fears

https://www.washingtonpost.com/business/2020/03/09/coronavirus-panic-stunning-market-declines-fan-recession-fears/

The markets, your money and talk of a worldwide “coronavirus” recession.

The 11-year run of market gains (also known as a “bull market”) is the 

. The latest jobs report on Friday indicated 273,000 jobs added, 3.5% unemployment in February.

largest single day decline in stock prices

stocks entered “bear market” territory.

Why Stocks Dropped: Uncertainty, fear over the impact of COVID-19 on global growth, consumer habits.

Bear market = stock prices fall more than 20%. This “down market” can last days, weeks, months, or years. A “bull market” references rising stock prices.

Largest decline in oil prices in more than 25 years.

Why Prices Dropped: Oil fuels the global economy; slower economic growth due to COVID-19 fears *could* lead to lower demand & lower prices.

ALSO: Saudi Arabia wanted to cut oil production along w/other oil producers to raise falling prices (less supply = higher prices); Russia disagreed. A price war has ensued, driving prices lower.

“If these prices go on for too long, there will be a lot of bankruptcies. You need at least $40 a barrel to break even for production in the United States and most won’t be making money at those prices.”

Oil analyst Jack Allardyce, Cantor Fitzgerald Europe. Oil prices fluctuate but recently dropped as low as $30 a barrel. While lower oil prices may lead to lower gas prices, they can also lead to job losses.

“What we have now is really two epidemics. We have an epidemic of the coronavirus, but we also have an epidemic of fear based around a narrative that is not necessarily keeping up with scientific reality. And, this narrative has been quite striking. It’s a dangerous time for the stock market.”

Robert Shiller, Yale professor and Nobel Prize winner

“We are going to take care of and have been taking care of the American public and the American economy.”

Pres. Trump says the White House will work towards providing some tax cuts and economic support for industries impacted. Expectations of these programs helped steady stocks temporarily, but a reminder - the House of Representatives has the “power of the purse” to tax and legislate economic policy. Details are TBD.

“A global recession is more likely than not.”

Economist Mark Zandi who says nervous consumers pulling back spending may lead to an economic recession. The health of the American consumer remains a major focus for health officials, investors, and economists alike. The American consumer drives two-thirds of the world's largest economy with their spending; any change in their habits can trigger a change for better or worse.

Reminder: Recessions, or periods of when the economy contracts rather than grows, can vary in severity and length of time. Over the last 100 years, recessions ranged from several years during the Great Depression to a period of 6 months.

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