Tuesday, March 21, 2023

‘Simply not functional’: quotes from a tumultuous year in the markets

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The year 2020 will be the time when the coronavirus crisis almost shattered the financial markets.

Investors watched with growing horror in March as the stock selloff turned into a liquidity crunch where even the ultra-safe US government bond market struggled to match buyers and sellers – challenging assumptions elementary risk and threatening the fundamentals of finance. system.

Central banks and governments struggled to stop the rot at first, before proposing unprecedented bond buying and rate cuts that laid the groundwork for a record “any rally“.

This is the story of a tumultuous year, through the words of those who saw the events unfold firsthand.

“Which makes this worrying. . . does nobody really know how it’s gonna be ‘

Timothy Moe, Goldman Sachs

January 23: Chinese equities fall the last day of trading before the lunar holiday, after Wuhan, the city at the center of the coronavirus outbreak, is placed under lockdown measures. When markets reopen on February 3, the benchmark CSI 300 has worst day since mid-2015.

“ It’s not just an Asian problem anymore ”

Robert Carnell, ING

February 24: Global equities have their worst day two years after Italy moved to quarantine cities, the virus has spread to Europe.

“ Rate cuts will not help restock empty grocery shelves ”

Seema Shah of the world’s leading investors

March 3: The US Federal Reserve cuts its key rate by 0.5 percentage point, hoping to reassure a market panicked by the spread of the virus. It has the opposite effect, as investors questioned the scale of the movement and the effectiveness of monetary easing in dealing with a demand shock.

Fed Chairman Jay Powell has disappointed some investors in hopes of a bigger rate cut © Mark Makela / Getty

“It is very rare that a collapse in demand coincides with a surge in supply. . . The price collapse is just beginning ‘

ROBERT McNally at Rapidan Energy Group

March 9: Brent brut falls a quarter, after falling 30 percent when trade opened in Asia, after Saudi Arabia responded to Russia’s refusal to take barrels off the market by starting a price war.

“ The market has been shaken to the point of breaking up ”

Masanari Takada at Nomura

March 12 was a deadly day for the markets. President Donald Trump’s ban on most European flights, announced the night before, scared stock market investors and the Fed’s cash injection failed to restore the mood. Wall Street is having its worst day since the crash of 1987.

Prosecutors are said to be closed later in March as the crisis worsens © Andrew Kelly / Reuters

“There is a fundamental problem in the treasury market. It just doesn’t work ‘

Gregory Peters of PGIM Fixed Income

Strategists struggle to understand what’s going on in what is widely considered the world’s deepest and most liquid market, U.S. government bonds, which had started to crumble. grab the 11th of March. “In a crisis like this, all the weak spots are exposed,” said William Dudley, former head of the New York branch of the Fed, later.

“The market had been prepared for a 2008 type response. Instead, we felt like the ECB was not in control.”

Richard McGuire of Rabobank

And Christine Lagarde – freshly occupied at the head of the European Central Bank – sets off a sovereign bond sell-off when she told investors “we are not here to close the spreads”, referring to the additional interest rates paid by the weakest borrowers in the eurozone.

ECB Director Christine Lagarde’s first comments on the crisis were not well received © Thomas Lohnes / Getty

“I think there are a lot of people on Wall Street who are very happy. And I can tell you that I am very happy, I did not expect it. And I like to be surprised ‘


March 15: The Fed delivered a surprise Sunday brought down to close to zero of its main key rate. Investors are wondering if this means monetary policy has reached its limit.

“ A lot of people need money and they liquidate the only thing they can ”

Mike Riddell of Allianz Global Investors

March 18: Supposedly Safe Government Bonds Undergo Periods of Blind Selling, Due to Global Volatility empire. Oil prices are at their lowest point in almost 17 years and the pound is hitting its lowest point since the 1980s. “Hell is coming,” said hedge fund manager Bill Ackman in a CNBC interview, warning of the devastating impact of the virus and calling for an immediate lockdown.

“It’s a bazooka and it was necessary. The advertised programs were good but did not go far enough. It goes quite far ‘

Jim Shepard, Mizuho

March 23: The Fed promises to buy government bonds in unlimited quantities, and to buy corporate debt for the first time, in a dramatic intervention that would calm the markets and mark the bottom of US stocks. It came a few days after the ECB promised to buy 750 billion euros of additional bonds with a commitment “without limits” in the euro zone.

“Although this is primarily a public health crisis, there is a real and imminent potential for it to turn into a total credit and liquidity crisis”, wrote Alan Waxman, Sixth Street Partners, typical of the vibe.

“ This is a high quality company that now borrows at wear rates ”

John McClain of Diamond Hill Capital Management

April 1: Carnival of the operator of cruisers affected by the coronavirus must pay double-digit interest rates on its debt, but manages to close the deal, signaling that the Fed’s major interventions have restored sentiment.

“ Trump has essentially become the de facto president of Opec ”

Helima Croft of RBC Capital Markets

April 13: The Opec cartel of oil-producing countries signs historic agreement to curb their oil production and end a deadly price war – under pressure from the US president, anxious to protect the US shale sector.

The oil market stunned spectators in April, with US prices dropping well below zero © Alexei Andronov / TASS / Getty

“ Too much oil, with nowhere to put it ”

Kit Juckes, a senior strategist at Société Générale

April 21: The deal was not enough to offset the affected coronavirus on demand. Crude Oil Prices in the United States crash below zero for the first time, after the oil glut left buyers with nowhere to put their oil. “This is possibly the most volatile and difficult market we have ever seen,” said Douglas King of RCMA Capital, reflecting on the turmoil.

“The markets are currently at a high level of sugar. They don’t mean much to me ‘

Andrew Left, Lemon Research

April 30: US equities cap their biggest monthly rally since 1987, up nearly 13%, as the “fear of failing” brings buyers back into the market despite the unfolding crisis. Oil prices are also rebounding.

“The story of the markets is that they always go both ways”

Lee Spelman, JPMorgan Asset Management

June 8: Blue-chip S&P 500 stock index becomes positive for the year, after rising more than 40% from its March low.

“We see the recovery fund. . . as a game changer for Europe ”

Reza Moghadam, Morgan Stanley

July 21: investors greet a 750 billion euro Covid-19 recovery fund that will bring greater financial integration to the EU and make Brussels a major borrower in the bond markets.

The President of the European Commission, Ursula von der Leyen. The EU’s landmark deal on a € 750 billion recovery fund has boosted investors © Francois Walschaerts / AFP / Getty

“ Gold has finally arrived on Main Street as an asset that people really need ”

Peter Grosskopf at Sprott

July 27: The precious metal shots a record high, driven by coronavirus concerns and returns on other assets being pushed down by central bank intervention.

“ It’s hard to believe but the 2020 bear market is officially over ”

Solita Marcelli, UBS Global Wealth Management

August 18: The S&P 500 finally exceeds its previous record, set in February. This contrasts with the US dollar, which fell to its lowest level in two years, as interest rate cuts and concerns about the US economy deter investors from diverting assets into dollars.

“The actions were evaluated to perfection. It was always going to be difficult to maintain when you have a lag between how the markets are performing and what the global economies are doing. ”

Alexis Gray DE Vanguard

September 9: Technology stocks suffer a late-summer correction, with hot Tesla stock losing a fifth of its value in a single day. The nerves in the market had increased due to valuations fueled by the big bets made in the options market by the Japanese group SoftBank.

Tesla characterized the 2020 boom in ‘new economy’ stocks © David Paul Morris / Bloomberg

“ This is an outrageous demand, which they are going to need for the huge wave of supply en route ”

Peter Goves, MFS Investment Management

October 20: EU receives the largest order book ever on global bond markets for the first tranche of its coronavirus-related borrowings. Investors have made offers of 233 billion euros for the 17 billion euros of proposed debt.

“After the US election, investors turned to Covid over a vaccine. Today the vaccine wins’

Mohammed Kazmi at Union Bancaire Privée

November 9: BioNTech / Pfizer announcement that its Covid-19 vaccine is over 90% effective add market the optimism over Joe Biden’s victory in the US presidential election. Similar announcements from other drug groups would lead global stock markets to better monthly performance for decades, with economically sensitive stocks in mind.

Joe Biden’s election victory reassured investors concerned by the political turmoil of a contested result © Angela Weiss / AFP / Getty

“I don’t know what else to say. I am very moved ‘

Brian Chesky of Airbnb, on CNBC

December 10: A roller coaster year capped off new records for tech stocks and a wave of IPOs that drew parallels with the dotcom boom and collapse two decades earlier. Vacation rental company Airbnb shares more than double the first day of trading, after the first day of Doordash pop earlier in the week.

“We’ve all been in the markets long enough to know this doesn’t end well,” said Jim Tierney of AllianceBernstein.


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