The 11 Year Old Bull Market Ends – March 12, 2020

The DJIA and S&P 500 Index are down over 20% from their respective peaks. We have entered a bear market.

Two things we know: Bear market follow bull markets, and bull markets follow bear markets. That has been the history since the beginning.

While the swiftness of the decline is unsettling, let’s remember that volatility matters most to short-term traders.

Today’s catalyst: a thumb’s down from analysts and investors to last night’s speech by the president. Investors are looking for fiscal firepower, i.e., cash to consumers. That didn’t happen.

The ECB’s meeting also seemed to underwhelm. European Central Bank President Christine Lagarde downplayed the idea the central bank might come to the aid of struggling eurozone countries, and Italian bonds came under heavy pressure.

However, the NY Fed announced $1.5 trillion in repo operations over the next couple of days (that’s massive), and additional measures to inject liquidity into the financial system amid recent disruptions in the Treasury market.

It was a monetary bazooka that temporarily soothed investor worries.

However, we remain in a situation dominated by economic uncertainty. Throw in quant models that trade on headlines and momentum, and the pullback has been swift.

What’s needed, or would be very helpful: clarity on the virus and the economy.

Created 2020-03-12 20:34:39