CWS Market Review – March 9, 2020

Today was a very dramatic day on Wall Street, and I wanted to send you a special update to let you know what happened. The stock market had its worst day in more than a decade. Let me explain what happened.

It all begins in the oil market. For the last few years, Russia, a non-OPEC member, has cooperated with OPEC in keeping oil prices up. The cartel wanted to have more production cuts. Russia said no and walked out of last week’s meeting in Vienna. In their mind, any production cut only serves to help American shale companies.

The thing about a cartel is that everybody has to work together. One weak link ruins the whole thing. That’s what happened.

The Saudis responded by declaring a price war. They’re trying to punish Russia with much, much lower oil prices. Combined with weaker demand due to the coronavirus, the price for oil plunged. At one point, oil was down over 30% today. That’s the biggest drop since the Gulf War 30 years ago.

That impacts a large part of the world economy. This morning, trading volume in Europe was three times the average. The U.S. stock market opened much lower. After four minutes of trading, the S&P 500 was down by 7%. That triggered a circuit breaker where the exchange was shut down for 15 minutes.

The market then reopened, but things were far from calm. The Dow eventually closed down by 2,000 points. For context, that’s more than the whole thing was worth in 1988. The yield on the 10-year Treasury fell below 0.4%. The VIX, or volatility index, reached 62 today. Just to give you an example of how extreme trading was, shares of Haliburton were halted three times today.

The stock market had its worst day since December 2008. The S&P 500 lost 7.60%. The S&P 500 High Beta Index was down over 12%. The Energy Sector had its worst day ever. Fortunately, we don’t have any energy stocks on our Buy List. For the day, our Buy List fell 6.74%. Bad, but well ahead of the rest of the market.

The entire U.S. yield curve was under 1%. I think the Federal Reserve will move soon. Perhaps it will be a coordinated effort with other central banks like the ECB, BOJ and BOE. We’re not done just yet. You can expect more volatility ahead.

One more thing: today is the eleventh anniversary of the bear market low in 2009. It was also a Monday. I’ll have more for you in our next regular update.

– Eddy

Posted by on March 9th, 2020 at 9:05 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.