**Update: I wrote this draft on Saturday, and since then oil has dropped 30%, circuit breakers for the U.S. stock market fired this morning, and the 10-year U.S. bond yield has fallen below 0.5%. The charts and numbers you see here are as of Friday. My stance has not changed.
What do the following have in common?
- U.S. marginal tax rates are too low
- Central banks printing money will lead to asset bubbles
- Washington partisanship
- Political turmoil with Russia, the Middle East, or North Korea
- Trade war with China
These are the risks that could derail the decade long bull market and business cycle we’ve enjoyed since 2009, according to market pundits. Viral contagion? Nowhere to be found.
At this point there are over 100,000 cases of Coronavirus across the world, with 400 being here in the U.S. While the media has certainly fanned the flames of panic, COVID-19 will have a substantial negative impact on the global economy. The best epidemiologists in the world are forecasting that 40%-70% of the world’s population will contract the virus. People are beginning to cancel flights & vacations. Small businesses are scrambling to put together “work from home” contingency plans. All of which will be a drag on the economy.
The markets have…taken notice. After a tumultuous few weeks, the S&P 500 is now down 8% on the year and investors around the world have flocked to safe havens like long term U.S. treasury bonds.
Here’s the return of TLT, a 20+ year U.S. government bond ETF over the last week and YTD.