I sure as heck did not see that coming, and I'm not referring to Mike Bloomberg's five-delegate win Tuesday night in American Samoa. I instead am referring to the Federal Reserve's emergency rate cut of one-half percentage point ahead of the March meeting.
I was as shocked as the market, and not in a good way. It sent a signal of fear and that the coronavirus is a larger force to be reckoned with than many imagine. The medicine did not calm markets but instead reinforced the fear, and I wish the Fed had stayed out of it.
Tuesday's drop of nearly 3% in the S&P 500 was supplanted in the early going by a big jump in stocks. That rebound, in my view, is not related to the rate cut or any positive news about the coronavirus, but rather Joe Biden's big Super Tuesday. Make no mistake: Markets greatly fear a Bernie Sanders nomination and any possibility of his presidency. There is a greater dynamic happening in the markets than just fears that the coronavirus will cause economic calamity. We've got virus fears in an election year -- the perfect storm.
Given my obsession with market volatility as measured in terms of days that the S&P 500 rises or falls at least 1%, I am already receiving questions about how the current volatility compares with that of 2008-2009. The answer is "not even close," but it's very early.
Since Feb. 20, the S&P 500 has experienced six volatile days out of eight total, with four of those days seeing moves in excess of 3% and two days with moves of greater than 4%. That's some extreme short-term volatility, and during that period the S&P has fallen about 11%.
During the worst of 2008, the fourth quarter to be exact, the S&P 500 closed plus or minus at least 1% or more on 50 of the 64 trading days, or four out of every five sessions. Shockingly, we experienced 16 days when the index moved plus or minus 5%, a remarkable feat considering that in the 57-year period from 1950 to 2007 there were a total of 19 such moves. The S&P 500 was down 22.6% during that quarter and 17% in October alone. I still can't believe my eyes when I review this data, but it happened, and we lived through it.
It's early in the latest crisis and none of us knows for sure where this is headed, but it's a long, long way to 2008. I can point to several periods of post 2008-2009 volatility post that look like the current one (late January 2018, late August-early September 2015, late July-early October 2011, April-May 2010) and I can't remember exactly what the crises of the day were. Maybe someday we'll say the same about the great coronavirus scare of 2020.