📉 COVID-19 crashes the market

Monday, March 16, 2020 by Snacks
_With markets in crisis mode, we're in this fight together_

With markets in crisis mode, we're in this fight together

Last Week’s Market Moves
Dow Jones
23,186 (-10.36%)
S&P 500
2,711 (-8.78%)
7,875 (-8.17%)
$5,552 (-39.25%)
10-Yr US Treasury

Hey Snackers,

Global health pandemic, market crash, economic sick day (sick "month?" season? year?). Policymakers tried to get extra creative last week (and through the weekend) to resuscitate everything:

  • Financial medicine: Interest rates were just cut to zero and emergency loans are ready to go for financial institutions.
  • Economic medicine: Students don't have to worry about loan interest charges, the newly unemployed are set to get enhanced benefits, and struggling small businesses have government loans available.
  • Health medicine: Congress passed a bill to make COVID-19 testing free and big public events are virtually all cancelled. Major cities have started takeout-only rules for restaurants/bars.

Markets rallied big on Friday after a brutal week — the Dow had its best single-day point gain ever, after Wall Street's worst day in 30 years. The S&P 500 has fallen over 16% this year, with more market turmoil likely ahead.


1. Policymakers enter crisis mode on COVID-19 as markets crash

Welp, that escalated quickly… Wall Street prides itself on predicting risks and opportunities quicker than everybody else. Two weeks ago, it predicted doom as markets suffered their worst week since 2008. Then, things got worse:

  1. COVID 19 shut down the world’s economy: It’s officially a global pandemic and a National Emergency in the US. Some European countries have closed businesses except for food, health, and banks.
  2. Oil markets crashed: “Anyone can die in a freak, gasoline accident.” -- Saudi Arabia to Russia. The two oil-rich countries fighting about how much oil to pump triggered the biggest 1-day drop in oil prices since the 1991 Persian Gulf War.

Stocks fly together (downward)… When economies and markets get shaken by something as far-reaching as a pandemic, investors tend to hit the “sell” button as indiscriminately as a “down for anything” Tinder user swipes right.

  • The winners: Some businesses stand to benefit from extended Work From Home and a growing "sanitize-it-all" trend.
  • The losers: Everyone else. Many expect an economic recession has already started (recessions = 6 straight months of economic shrinkage). FYI, the last one in the US ended in June of '09. Shrinking economy ➡️ shrinking profits ➡️ shrinking stock prices.

What goes up, must come down (and vice versa)... Each “bull market” is followed by a “bear market”, and versa vice — it’s like a see-saw with giant duffle bags of money sliding back and forth.

  • Bull markets: Once stocks rise 20% overall from the last low, it’s called a “bull market”, which tends to include economic growth and falling unemployment.
  • Bear markets: Last week stocks fell past the “bear market” threshold, meaning we’d dropped over 20% since February’s record highs. This tends to bring economic shrinkage and rising unemployment.
  • Yo-Yo Mountain: Wealth advisers generally recommend not timing the market's ups/downs because they're hard to predict. Over the past nine decades, stocks overall have risen about 10% per year on average. It's like a long hike up a mountain with a yo-yo going up-and-down, but the mountain's overall slope rises.

2. Who's up...

  • Pregame hosted over Zoom... Shares of video conferencing company Zoom have soared 63% in 3 months. As meetings turn virtual and WFH goes standard, more companies are Zooming (it earned verb status) — its quarterly sales jumped 78% from the year before. Wednesday was Zoom's biggest download day ever. Now it's offering videoconferencing to K-12 schools for free as classes move online.

  • Groupies wanted... Pepsi splurged almost $4B on energy drink throwback Rockstar, which Pepsi has distributed since '09. Big Bev has been shifting to "functional beverages" — think low-cal energy drinks, hard kombucha, CBD-infused liquid, and anything you drink "for a reason" besides just hydration or the alcohol. So instead of wasting years and $$$ to build up its own brand to rival Rockstar, Pepsi now owns the #3 energy functional bev ASAP.


3. ... and who's down

  • Terrible time to be 'Sassy and Gassy'... Oil prices took their biggest plunge since '91, dropping 24% last Monday. Part of that is coronavirus-reduced travel demand. The rest is reality show-worthy OPEC drama: Saudi Arabia wanted Russia to cut oil production to boost prices of their precious export. But Russia refused (reportedly, to hurt US oil producers). So Saudi jacked up its production, dropping oil prices even further. Since then, Exxon Mobil stock is down 21% and Occidental Petroleum fell 53%.

  • Despite your current WFH lifestyle... work messaging service Slack isn't doing as well as its "stay-at-home" peers (like Zoom). Shares dropped 20% after Slack's earnings revealed it's growing slower than investors expected. The problem is that it simply takes way longer to implement Slack than Zoom (think salespeople, contracts, IT integrations, and learning curves teaching Bruce what "channels" are). So Slack's experiencing some "opportunity blockage" — like the Baby Yoda toy situation.

What else we’re Snackin’

  • Visualize: The history of pandemics, visualized in a 1 infographic — see how coronavirus compares to the others so far
  • Forget: The top 10 items most left behind in Ubers, according to Uber — #3 is "BMW keys" (#2 is $100 bills)
  • Lead: How to lead during times of crisis and uncertainty (like Mom always said, it comes back to communication)
  • Stay: How to not go stir-crazy while self-isolating (push-ups are key — you can also write a classic novel)
  • Shop: A "pandemic planner" thinks coronavirus stockpilers shouldn't waste their money on these 4 items

This Week

Disclosure: Authors of this Snacks own shares of Slack

ID: 1120137

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