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ouid

"Do not fear! This is a cyclical phenomenon!"

This is caused by coronavirus. This has nothing to do with market patterns.

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> This has nothing to do with market patterns.

The market was priced for perfection. A pebble could have derailed it but instead of a pebble we have a bolder.

A pebble? Not likely, and certainly not with the hyper low interest rate environment.

There were lots of rocks larger than pebbles over the last few years: China trade war with escalating tariffs, global trade anxiety, Trump political chaos (Russia and generally), impeachment, Middle East chaos, US / Iran, US / North Korea (daily, escalating threats of nuclear war), Brexit. None of them derailed the market from pushing higher.

It required a boulder precisely because of the interest rate environment. A pebble would not have done anything. China's economy just got put into the freezer for the past two months, the global economy is under serious threat, and even now the market remains very richly priced. It might yet require something even larger than a boulder to take this market down fully.

I think you may have a short memory. The international situation has never been very different qualitatively than it is today. Iran has been a mess for 50 years, much of that time far worse than now. We have been at war with north korea for 70 years, some of that with actual armies marching and shooting each other. In the 70s and 80s planes were being hijacked and bombed every week. Hundreds of thousands of people died from AIDS. All the while the economy was up, down, or indifferent to these things. The world is constantly in turmoil, listen to a billy joel song for more details.

Coronavirus-induced supply-shock is just what it took to break a fragile system out of equilibrium.

Supply shock? I think the far bigger issue will be demand shock as all travel-related industries have fewer customers.

Both can be true. Chinese industry crawled to a halt for almost a month. We got "lucky" insofar as it happened right when Chinese industry annually crawls to a halt for two weeks, but there will be knock-on effects for sure.

How about both supply and demand shock?

A recession doesn't care the source.

i wonder whether by triggering (not causing) correction earlier than later the virus actually softened the otherwise much stronger crash which would have anyway happened sometime later due to all that overpumping/overinflating of the economy with the cheap money during the recent years (resulting in particular from the low rates amplified by the tax cuts).

It's like no one in government(or the Fed) has read Antifragile...

Yes! Or another excellent book, “The Misbehavior of Markets”.

"As long as the music is playing, you've got to get up and dance." -- Chuck Prince, Citigroup.

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