How Bad Could the Stock Market Selloff Get?

You may remember US President George Bush’s response shortly after the 9/11 terrorist attacks in 2001.

He said people should ‘go shopping for their families’, not stay huddled home in fear. And he encouraged traveling, saying, ‘Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed.’

Bush’s uplifting words aside, the New York Stock Exchange closed after the attacks and didn’t reopen until 17 September.

When trading resumed, the markets promptly tanked. By the end of the first week of trading the S&P 500 was down over 14%.

But then the panic selling began to subside.

The situation facing markets today under the coronavirus crisis — and the world’s response to contain it — are starkly different. And the impact on markets is deeper and moving far faster.

This time around Disney World is closed. And rather than encouraging us to go shopping, Prime Minister Scott Morrison is applauding ‘Australians who are engaging in self isolation.’

The second order effects of these pandemic containment efforts are still filtering through the markets. Uncertainty abounds.

For now, the sellers still look to far outnumber the bargain hunters.

How bad could the selling get?

At time of writing the ASX 200 is down 4.1%. That puts it down 35.3% over the past month.

Yes, that’s still significantly less than the 54% peak to trough crash endured during the GFC. But that loss occurred over some 18 months, from October 2017 through March 2009.

Losses from this pandemic fallout have been much more rapid.

And futures indicate another savage day in US markets today (overnight our time). After falling 4.3% on Friday, the S&P futures opened at limit down (–5%) this morning.

How bad could the selling get?

We’ll find out tomorrow. But Monday’s losses in US markets could easily approach 10% again. If not more…

PS: While most every stock has come under selling pressure in recent weeks, The Rum Rebellion editor Vern Gowdie lists five stocks he believes you should consider selling immediately. You can find out which ones, and why, in his free special report here.

Bernd Struben is an Editor of The Rum Rebellion. In this capacity, he has access to one of the most intriguing and powerful networks of practical investment insight anywhere in the world.

Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.

The Rum Rebellion