Thursday, Mar 16, 2023
“This must be Thursday,' said Arthur to himself, sinking low over his beer. 'I never could get the hang of Thursdays. '” – Douglas Adams ||
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MARKET
The mists of history
Today is an unwelcome anniversary – on March 16, 2020, the Dow Jones Industrial Index suffered its largest point drop in history, an even greater crash than 1929’s Black Monday. The night before, the Fed had slashed interest rates by a full percentage point to practically zero, and New York City’s mayor announced the closure of bars, restaurants and public schools. Here in Spain, we were already two days into lockdown.
Those currently watching the bond market dry up, risk premia go through the roof and banks scramble to stay afloat may remember the stress of that day – it was only three years ago. But the world is suffering a very different kind of tension now. Back then, we were more worried about making sure our loved ones were ok, not getting sick ourselves, and stocking up on food. Now, we’re focused on markets, wondering what will break next and what “safe” collateral even means. Back then, the US president had just yet again threatened to fire the chair of the Federal Reserve. Now, we are all hoping Chair Powell is holding up ok, and obsessed with what he will tell us next week. Back then, WTI crude oil was around $28/barrel and would soon go negative. Now, the literal plumbing of energy flows has been re-routed, supply security is tenuous, and prices are almost three times higher but dropping sharply in expectation of a global recession.
(chart via TradingView)
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