March 12, 2020
Worst Drop Since 1987
Dow Down 10%
Ferocious Bear Market Intensifies
Okay, the Dow wasn’t down 10%. It was down 9.9%. This was the worst down day for the Dow since 1987. Today was reminiscent of past down days that had a feel of capitulation. I am not calling for a “V-bottom” here, where the market snaps back and goes straight back up. I am suggesting that with the Dow now down 30% in a month, valuations are creating opportunities as prices have been slashed. Many good companies have become “AHY”: Accidentally High Yielders. As stock prices go down, their dividend yields go up. Some are now very high now. And relative to all-time low interest rates, these dividends support the “TINA” mantra: There Is No Alternative”. That concept infers there is no investment alternative more attractive than stocks. With stocks in a viscous sell-off, investors may not want to touch ’em. Remember, though, stocks do not go down forever.
Today was as wild a day as I ever seen in my 35-year career. Just 5 minutes after the opening bell, the market was halted from trading as a 7% fall in the S&P 500 index triggered the market’s “circuit breaker”. The Dow was down over 2,000 points before and after the trading halt. Then the Fed came to the rescue, so it looked, with an announcement it was pledging to pump over $1.5 trillion into the financial system. I had flash backs of TARP and QE and the other “emergency” “financial engineering” programs introduced by the Fed during the 2008 financial crisis. My concern is, though, we do not have another financial crisis now. WE HAVE A HEALTH CRISIS.
The bull market ended yesterday. It was 11 years old, after being born March 9, 2009. Today’s action was convincing; we are in a bear market. There was a tremendous rush for the exit as sellers sold hard on heavy volume in the last 30 minutes. That has been the trend in this move down, and indicative of a lack of confidence in the market; aka buyers.
Here’s the scorecard:
As the Russell 2000 index indicates, this is a “risk-off” market. The higher risk, small cap companies have been hit the hardest as they typically are in bear markets.
As the table below shows, today’s point loss of 2,352 points in the Dow was largest in history.
