Here We Go....
The Saudis made a big mistake on Saturday by cutting oil prices massively all at once. That dumb move trashed the energy stocks today and rattled the markets badly. They should have spread the price reduction out into 10 minor price cuts, two days apart, and slowly brought oil prices down as the markets adjusted to lower prices.
People are blaming the media too much for causing panic. There have been all kinds of unprecedented events that are stunning the financial markets, such as the lockdown and quarantine of a Chinese city with millions of residents, and the quarantine of an entire Italian state. The CDC made a very unusual statement saying the epidemic could get really bad in America and was likely to disrupt everyday life. That was an oddly pessimistic statement from the CDC, and the financial markets don’t like highly unusual negative statements from government.
The S&P 500 Index is close to bear market territory now. A bear market would start if the index breaks below 2700, and right now it’s around 2760. We need some positive news about the viral epidemic and no more dumb, stunning moves by the Saudis or anyone else. I don’t think cutting interest rates more would do any good. That would just make people wonder if the Fed knows that we’re starting to go into recession. We need progress in containing the coronavirus epidemic and no more doom and gloom about the epidemic from governments around the world, especially our own government.