Guest News Brief by Kip Hansen — 18 May 2020
There has been a lot of talk in the press and from talking heads that the Covid lockdown has crashed stock markets and caused loses of trillions of dollars.
It is true that stock markets took an initial heavy hit – but all things in the stock markets are relative. Of course, there has been an “economic downturn” – the economy has been literally turned down by edict from national and state governments – millions have been put out of work as their employers have been ordered to stop doing business by the multitude of nations that have sacrificed their economies in the [misguided] belief that doing so “saves lives”.
But the idea that the Worldwide Covid Lockdown has crashed U.S. stock markets is simply not true.
Here is the data, from Yahoo Finance, as of 1145 hrs ET, 18 May 2020:
[Narrow yellow horizontal lines have been drawn at today’s level to illustrate when this level was last seen in the market. You can see the full sized originals from this page — clicking on the three indexes at the top bring up individual pages with graphs. You can select “Max” for the time period, and “Full Screen” to see the updated interactive versions of the images used below – kh ]
It is obvious that there was a shock response to ordered lockdowns visible in each of the three indexes – but these sharp drops only took markets back down to the levels seem in late 2017 or early 2018 – two years of unconstrained gains were temporarily lost.
The NASDAQ has almost entirely recovered. The S&P is back up to levels seen last year while the Dow Jones (remember, this is the Dow Jones Industrial Average) is still down at the levels seen in 2018 and 2019.
There is no stockmarket crash in response to the pandemic – the three major U.S. markets are all higher today than they were in January 2019. Only the Dow Jones Industrial Average is even seriously lagging.
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And that’s the news for the day….
Don’t ask me to explain it, I don’t know. I am no financial wizard. But it sure is interesting – even I thought the markets would be severely affected by shutting down of much of our economic engine.
Personal note: Many of us older citizens have our life savings invested in various ways – some have pension funds, some have personal nest eggs – that depend on the health of the stock and bond markets. Depending on the savvy of our financial advisors – be it ourselves or finance professionals – we have weathered the storm rather handily, despite ill-advised actions by our governments in response to the Covid pandemic.
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