March 17, 2020
In the case of the Global Financial Crisis, Wall Street started panicking in mid-2007. Main street didn’t start feeling it until late 2008 to mid 2009 (stocks bottomed in March of 2009).
In this case, the panic on Wall Street started a month ago. Main Street just started panicking three-to-four days ago. The panic on Wall Street was driven by the complete unknown outcome of the health crisis, and the uncertainty surrounding the impact it would have on the economy. Ironically, it’s just as potential solutions start emerging, to the unknown outcome, that panic ensues on Main Street.
This may give us a clue as to where we are in this crisis, for markets (the bottom?).
We’ve had a significant rate of change on the health crisis front (from no plan, to a plan with significant hope). Wall Street likes “rate of change.” From “nothing” to “something” is a big rate of change.
Also remember, as we’ve discussed, historically major turning points in markets are associated with some sort of intervention. And markets can turn well before there is clarity on the outcome (the coronavirus, in this case). Over the past week, we’ve had a global bazooka of intervention.
With this above in mind, let’s take another look at how this big trendline is holding up on the S&P 500 — the trendline that represents the recovery from the Global Financial Crisis…
This line comes in around 2,485. We get another close ABOVE it today.