03.09.20 - After an already bloody two weeks on Wall Street this morning, the Dow fell 2,000 points with the S&P 500 falling more than 7% triggering a mandatory halt in trading. The Corona Virus is only a partial cause of this, it's an all-out OPEC price war combined with a stagnant China stirring fears of global market uncertainty. Goldman Sachs is indicating that price per barrel may go below $20 to their extraction margin cost.
Investors are rushing to higher ground in US Treasuries driving the 10-year Treasury yield to 0.318% stirring fears of a looming liquidity crisis as well as potentially seeing some hedge funds and banks get wiped out from margin calls. However, there is an upside. If we fall the trends following the previous market drops with investors searching for safe havens, we could see a rush of cash towards private investments and an opportunity to buy-in low into the market in the inevitable rebound. Germany and China are on the brink of recession but the US's underlying economic health is the most stable bedrock in the world at the moment.
The opportunity in risk-off behavior in markets is ultimately irrational. Fear and uncertainty is the perfect climate to jump in on undervalued assets. Supply chains will ultimately recover and OPEC will come to its senses as price per barrel nears extraction margins. Foreign capital will continue to seek safe haven in US assets as central banks around the world have eased money at a substantially faster rate than the US leaving it as the best viable option for asset security.
