Commentary
Last week—March 9th to be exact—was the 11th anniversary of the start of the bull market that began in 2009. Instead of celebration, the bull market was ceremoniously ended by a combination of a global pandemic and oil price war.
It began on Sunday when news hit that Saudi Arabia had declared an oil-price war after the OPEC+ cartel it leads had failed to come to an agreement with Russia. On Monday, as new COVID-19 cases continued to be reported, stocks crashed. Oil prices plunged as much as 31%, the worst drop since the Gulf War in 1991. Investors flocked to the safety of Treasury bonds, pushing yields on all tenors below 1%, the first time that has ever happened. Twice during the week, trading was halted as stocks moved more than 7%. The VIX hit a new record of 75.
Unprecedented volatility continued for the rest of the week as massive policy announcements from the White House, U.S. Federal Reserve and global governments and policymakers whipsawed markets between panic selling and panic buying. When markets closed on Friday, the S&P 500 was down 9%, but only thanks to an almost 10% rally on Friday.
On Sunday night, after an emergency meeting the U.S. Federal Reserve cut interest rates to close to zero and announced it would expand its purchase of Treasuries and mortgage-backed securities by at least $700 billion. The Google website for locating COVID-19 testing venues is expected to go live today.
Venture Capital Washout
According to data from Bloomberg, Venture Capital activity is down 22% since the start of the year. However, that activity had already slowed dramatically prior to the COVID-19 crisis intensifying as the index reached an all-time high in June of 2019 and is now down 52% from those levels.
The slowdown in growth and stress in capital markets as a result of the crisis does not bode well for an industry so reliant on external capital.
Source: Bloomberg
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