Chill out! Really. This market needs to be allowed to operate as normal, and that includes what is called price discovery. When a herd of folks all of a sudden discovers that maybe paying generational-high multiples for stocks exactly one month ago (February 19th was the all-time high for the three major indices) was a bad idea, selling will ensue.
That's what is happening here. Stock traders need to be able to trade stocks. Circuit breakers, limit-down/limit-ups, shortened trading hours, bans on short-selling, etc., just make selloffs more intense. Anything that hampers price discovery does.
Also, I am really, really tired of hearing people who are not scientists discuss the appropriate governmental response to COVID-19. Bill Ackman's comments on CNBC yesterday were appalling. The end of America? Really, Bill? Fear-mongering has no place here.
Also, that fear-mongering seems to be impacting the Treasury Bond market which is truly a safe haven. I saw the 10-year UST yield quoted at 1.18% when by all rights it should be negative, as sovereign bonds of similar maturity are across the world. After 40 years of profligate spending across U.S. administrations of both stripes, we are now worried about the cost of a government program (the stimulus?) Give me a break.
And I just had to issue myself a stop because I was about to type "there will be blood." No, companies declaring bankruptcy should not be equated to human carnage. But there will be bankruptcies among high-profile U.S. companies in the next few months. The massive expansion of high-yield spreads in the past week shows a real fear in the credit markets, and one that I believe is warranted.
The vulnerable sectors are pretty obvious, but would include retail, airlines and energy after oil's remarkable plunge. I like to style myself as a Sam Zell-style Grave Dancer investor, but I am not bottom-fishing stocks in those sectors, and neither should you. There are opportunities in individual credits that are ridiculously mispriced here, but you need to be very, very, careful with the idiosyncratic risk there.
What should you be doing?
Reallocate money from equities to fixed income. It is so damn hard to sell AFTER you have watched the value of a stock/index decline. I know. I absolutely hate to do it. What we are talking about here, though, is an unprecedented slowdown upcoming in both the U.S. and global economy. Stocks are valued on growth. Bonds are valued on creditworthiness. Government bonds are paid off by money printed by those very same governments. The calculus is easy.
Reallocating your portfolio to reflect the new reality impacting the global economy isn't panicking. Calmly, rationally figure out how much risk you are willing to take with the renewed knowledge that equities are by definition a risky asset class. It is not too late to do this. Not at all.
Those selling stocks here are actually acting rationally. It may not seem that way if you listen to either the prophets of doom or the "buy on the way down" buffoon, but it is the case. Markets find their own level. Just make sure that your levels and your financial future are not impacted by excessive hope or excessive fear. They are both expensive mistakes.