Markets In The Corona Virus Crisis - Continued (Fifth Part)

Mahmut Karayel
10 Apr 2020

MARKETS IN THE CORONA VIRUS CRISIS (Continued on 2019-04-09)

This is the update of last weeks' blog as we promised. We have now completed seventh weeks of the COVID-19 Black Swan.

During the seventh week of the COVID-19 Black Swan something strange happened:

  • The US Corona Virus related death toll topped Italy, reaching 18,300.
  • Unemployment rate is increasing at a record pace. Economists are expecting unemployment rate to reach the Great Recession levels.
  • Yet, S&P500 index gained 12% in this four-day week, the best week since 1974.

  • We can only conclude that confusion became the norm. It is difficult to explain this as just the market is getting used to the bad news.
  • We believe that the reality of jobless claims has not set into the markets yet. Even optimistic estimates are topping 20% unemployment rate when all is said and done
  • Annualized volatility continued to decrease slightly but is still around the historical high levels.

When the dust settles, no assumption will be spared. We will re-examine, disect and digest all of our assumptions.

The graph below shows the value of a $10,000 portfolio during the two most severe downturns in the past 80 years.

Comparison of Two Black Swans

Volatility is more severe in the Corona Virus Reality down-turn.

Please share your thoughts in the comments section.

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Suggested Data References in This Article (ALTADATA Marketplace)