(New York)

Markets are off to their worst start in recent memory. With oil having plunged 30% earlier in the day, US markets opened to a very abrupt 7% decline. The sharp plunge triggered an automatic market halt of 15 minutes. At the time of writing, the Dow is down 6.37% and the S&P 500 is down 6.19%. US Bond yields plunged too, with the 10-year Treasury at one point having a 0.43% yield. Janus Henderson summarized the markets best, saying “In just over two weeks, investor sentiment has swung from complacency to panic … What started as a virus-driven de-risking has now mutated into a broad-based, multi-asset capitulation”.

FINSUM: It is looking ever more like global central banks are going to have to step in with coordinated stimulus. That said, a virus is a unique kind of panic that cannot be instantly resolved. A recession now appears more likely than not.

(New York)

Imagine retiring this month. The Dow’s recent bottom means it was 18%+ off its peak. That is a really rough time to be entering the late stages of a career or early stages of retirement. One option for those worried about protecting income is a fixed index annuity. The insurance product guarantees full principal and is designed to offer upside as well. The idea is to have their yields outperform the market, but at the same time offer full downside protection.

FINSUM: Fixed index annuities are probably going to see a big rise in popularity this year given how poorly the stock market is doing. Worth consideration.

(Atlanta)

We can finally put a number on it. Anecdotal evidence has shown that airlines and other travel companies are getting hammered. Now analysts have an estimate of just how much of a hit airlines are going to take. The answer is more than $100 bn of lost business because of coronavirus. The specific figure is $113 bn, a 4x increase in forecasted lost revenue from just two weeks ago. Big airlines like Delta, United, and Southwest have been cutting routes and flights left and right.

FINSUM: These stocks have gotten pummeled because of Coronavirus. When is the right time to buy in?

(Houston)

Markets are plunging today, and the reason for the huge fall is the complete collapse of the oil market. The trouble is occurring because a price war is erupting in the oil market with Saudi Araba announcing that is was boosting production this morning. The move came as a response to Russia refusing to agree to production cuts to help insulate the market. The oil market responded by falling an eye-watering 30%. That immediately sent stocks plummeting too.

FINSUM: The market is doing its very best to compel Russia to agree to curb production. Surely a production cut wouldn’t cost them 30% of revenue!!

(New York)

Sudden downturns and crises have a knack for exposing underlying weakness in asset classes, and this coronavirus shock looks likely to expose corporate bonds. As investors will know, there are trillions of Dollars worth of bonds hanging on the lower cusp of investment grade at the same time as high yield issuance has surged in recent years. A quick reversal in economic fortunes could quickly cause soaring yields, delinquency, and bankruptcies. This would lead to a sharp drop in bond prices and potential economic disruptions.

FINSUM: Two key points to make on this story. Firstly, the corporate bond market is now worth $10 tn, 10x the size of 2001. Secondly, because many high yield bonds are illiquid and difficult to trade in periods of uncertainty, investors will try to offload other assets instead, which can spread the panic to other asset classes.