The whiplash is exhausting!
After the fourth worst day in the history of the Dow Jones Industrial Average, we were treated to the tenth best day in the history of the Dow. I’ll say this much, seeing the market have a historic day in the green is better than a historic day in the opposite direction like we had yesterday.
It was welcome relief - if you are like me, then probably every sneeze or random cough you’ve had for the last week or so has freaked you out. So, there is already this existential threat of “oh god I’m going to die!” But then there is also this threat of “oh god the markets are going to zero and I won’t have any money and I’m also going to die!” For some reason, dying AND losing lots of money in the stock market feels worse as a combination. So, a bounce up is nice. It alleviates some of the money aspect of the existential pain.
While I don’t think the crazy moves in the market are over just yet, it’s going to be hard to top what we saw the last two days. We know more cases are coming and the numbers are going to be shocking but, kind of like last weekend with the oil crisis, there would need to be another event that is outside the realm of expectation to continue these monster swings.
The most obvious and likely event in my mind for this would be the President announcing he has contracted COVID-19. (This, of course, not being something I want to have happen by any means but just a scenario that could add to an already highly elevated level of volatility.) Another situation would be some kind of structural blow up within some asset class that was perceived as safe - think mortgaged-backed securities in 2007.
One interesting thing to keep in mind here is that 2008 also had two days of extreme gains on this list. Those both came in October of 2008 and were well before the market found a bottom in March of 2009. So, I don’t think these extreme volatile days signal any sort of end but maybe signal just one symptom (see what I did there?) of a broader financial event unfolding. For example, most big crashes lead to recessions, with few exceptions (e.g. 1987). I am not sure we have hit the point of despair quite yet - this rally feels a bit like a sugar high.
But I’ll stay optimistic. After all, the financial system itself is a symptom of a broader human condition. And the turmoil reflects the gravity of the situation. I hope the real-life part of the equation can resolve soon with as little damage as possible so we can get back to worrying about more trivial things like some green or red numbers on a stock chart instead of if a random cough is a death sentence. So, with all that being said, make sure you stay healthy out there!