Distribusi menjadi komponen terbesar dalam biaya produksi industri.
REPUBLIKA.CO.ID, JAKARTA -- Ekonom Center of Reform on Economic (CORE) Indonesia Yusuf Rendy Manilet mengatakan, pemerintah dapat membantu menurunkan komponen biaya produksi untuk mendorong pertumbuhan industri ritel tahun ini. Khususnya untuk menghadapi tekanan di tengah dampak penyebaran virus corona.
Yusuf menjelaskan, salah satu komponen yang dapat dipotong adalah ongkos logistik. Diketahui, selama ini, biaya distribusi menjadi komponen terbesar dalam biaya produksi industri. "Pemerintah bisa membantu dari sisi ini, terutama untuk di luar Pulau Jawa," ujarnya ketika dihubungi Republika.co.id, Ahad (1/3).
Di sisi lain, Yusuf menambahkan, langkah pemerintah untuk mempercepat penyaluran bantuan sosial juga akan menjadi penolong ritel. Kebijakan ini berpotensi meningkatkan daya beli masyarakat, terutama kelas menengah ke bawah.
Yusuf menilai, Rancangan Undang-Undang (RUU) Omnibus Law Cipta Kerja juga dapat membantu pertumbuhan industri ritel. Dengan syarat, beleid ini dapat segera diresmikan menjadi undang-undang.
Poin yang ditunjukkan Yusuf adalah Rencana Detail Tata Ruang (RDTR). Nantinya, pemerintah pusat dapat mengambil alih penentuan RDTR. "Hal ini menjadi kabar positif untuk ritel karena lamanya proses RDTR menghambat kinerja ritel, khususnya di daerah," tuturnya.
Sebelumnya, Asosiasi Pengusaha Ritel Indonesia (Aprindo) meminta pemerintah memberikan insentif pajak atau dana retribusi untuk mengantisipasi kerugian sebagai dampak virus corona. Permintaan ini ditujukan mengingat ritel masih harus menanggung beban biaya operasional, sedangkan tingkat pemasukan terus tertekan.
Ketua Umum Aprindo Roy Mandey mengatakan, insentif yang sudah diberikan pemerintah melalui subsidi untuk mendorong daya beli masyarakat sudah baik. Tapi, pengusaha ritel tetap butuh insentif untuk kompensasi penurunan penjualan mereka. "Kita kan masih harus membiayai tenaga kerja juga," ujarnya kepada Republika di Badung, Bali, Kamis (27/2).
Roy mencatat, virus corona berdampak negatif terhadap kinerja ritel melalui penurunan jumlah wisatawan, terutama China. Diketahui, pada tahun lalu, jumlah wisatawan Cina berkontribusi 200 ribu kunjungan per bulan atau lebih dari 2 juta kunjungan sepanjang tahun.
Ketika diberlakukan pelarangan kunjungan turis China ke Indonesia selama sebulan terakhir, Roy mengatakan, otomatis pembelanjaan di ritel berkurang. Khususnya destinasi wisata unggulan seperti Bali.
Roy mencatat, kontribusi pembelian produk ritel di destinasi-destinasi wisata mencapai 35 hingga 40 persen terhadap pendapatan ritel sepanjang tahun. Ketika 90 persen penjualan tersebut menghilang akibat pelarangan kunjungan turis Cina, berarti kini peranannya turun menjadi sekitar lima sampai 10 persen. "Itu sangat signifikan bagi kami," ujarnya.
It’s Leap Day 2020, which got us thinking: Is there anything we can learn about market performance, particularly after this past week’s rout?
For starters, let’s be thankful it is Saturday, because stocks drop about two-thirds of the time on leap days. That’s worse than the average day, when stocks go up a little more than 50% of the time, and the average daily return is slightly positive. That makes sense given that the market tends to go up over time.
Leap years, however, have been good for the stock market. The S&P 500 has gone up a better-than-average 80% of the time during year with an extra day. The average return in a leap year, though, is about 11%, a little below the 12% long-term average. The S&P 500 returned about 12% in 2016, the most recent leap year. The Dow Jones Industrial Average returned more than 16% that year.
These stats provide some hope after this past week’s drop, but investors should beware small sample sizes. The data set has 23 observations in it. With only one independent variable—market return—that’s enough observations to have meaningful math. But the differences from the averages in returns and the likelihood of positive or negative returns aren’t significant.
Still, sometimes the numbers are fun to know. And with both the Dow and the S&P 500 down 11% in 2020, they offer a touch of hope.
Infectious disease experts have said that while the virus is highly communicable, its mortality rate is very low when compared with SARS, bird flu and other recent nasty diseases circling the globe. The most susceptible are the elderly and those with impaired immune systems.
While I do think much of the selling in the market was triggered by the spread of the coronavirus, much of what made us so vulnerable is that we were extremely extended and overbought by almost every technical measure.
While it was painful to watch the decline, the good news is that bear markets, which are defined as much by duration as price drop, rarely start from all-time highs.
Instead of putting this sell-off in the proper context, most of the Wall Street doomsayers being paraded out by the media just feed the selling frenzy, leading to an outbreak of investor anxiety.
Heart-wrenching and scary as a global health crisis may be, let’s not lose sight of the fact that historically, times like these have always proven to be excellent buying opportunities.
It is important to remember that years after SARS, bird flu, MRSA and Ebola all wreaked havoc on the market, when they subsided the market marched to new highs each and every time.
So do yourselves a favor: Be smart with your health and wise with your wealth, because whether it’s two, five or 10 years from now, this will just be another page in the history of financial market turbulence that investors will likely look back at as a buying opportunity.
Pengusaha ritel masih harus menanggung beban biaya operasional,
REPUBLIKA.CO.ID, BADUNG -- Asosiasi ritel">Pengusaha Ritel Indonesia (Aprindo) meminta pemerintah memberikan insentif pajak atau dana retribusi untuk mengantisipasi kerugian sebagai dampak virus corona. Sebab, pengusaha ritel masih harus menanggung beban biaya operasional, sedangkan tingkat pemasukan terus tertekan.
Ketua Umum Aprindo Roy Mandey mengatakan, insentif yang sudah diberikan pemerintah melalui subsidi untuk mendorong daya beli masyarakat sudah baik. Tapi, pengusaha ritel tetap butuh insentif untuk kompensasi penurunan penjualan mereka. "Kita kan masih harus membiayai tenaga kerja juga," ujarnya kepada Republika Badung, Bali, akhir pekan kemarin. Roy mencatat, virus corona berdampak negatif terhadap kinerja ritel melalui penurunan jumlah wisatawan, terutama Cina. Diketahui, pada tahun lalu, jumlah wisatawan Cina berkontribusi 200 ribu kunjungan per bulan atau lebih dari 2 juta kunjungan sepanjang tahun.
Ketika diberlakukan pelarangan kunjungan turis Cina ke Indonesia selama sebulan terakhir, Roy mengatakan, otomatis pembelanjaan di ritel berkurang. Khususnya destinasi wisata unggulan seperti Bali.
Roy mencatat, kontribusi pembelian produk ritel di destinasi-destinasi wisata mencapai 35 hingga 40 persen terhadap pendapatan ritel sepanjang tahun. Ketika 90 persen penjualan tersebut menghilang akibat pelarangan kunjungan turis Cina, berarti kini peranannya turun menjadi sekitar lima sampai 10 persen. "Itu sangat signifikan bagi kami," ujarnya.
Potensi penurunan kontribusi ritel di destinasi wisata semakin besar mengingat sejumlah negara melakukan pembatasan terhadap kunjungan ke luar negeri, termasuk Indonesia. Terbaru, Singapura membatasi penerbangan ke Indonesia untuk menekan penyebaran virus corona.
Roy mengakui, virus corona menjadi faktor risiko yang tidak pernah terprediksi oleh Aprindo. Optimisme pengusaha ritel yang semula menguat pada tahun ini setelah mengalami perlambatan penjualan sepanjang 2019 pun menurun.
Roy menyebutkan, target pertumbuhan ritel pun terpaksa harus dikoreksi kembali. Dari yang semula diyakini mampu tumbuh double digit, sekarang harus direvisi menjadi single digit. "Kelihatannya, sama kaya tahun lalu, delapan sampai sembilan persen," tuturnya.
Downside risk Aprindo tidak hanya dipengaruhi faktor corona. Roy menuturkan, cuaca ekstrim yang menyebabkan banjir di sejumlah titik di Indonesia berdampak pada penurunan penjualan ritel.
Berdasarkan catatan yang dipaparkan Roy, banjir satu hari saja sudah merugikan ritel hingga Rp 1 miliar. Sebab, banyak orang tidak mau berbelanja dan barang-barang jualan di ritel pun tidak sedikit yang terendam. "Oleh karena itu, kita berharap adanya insentif dari pemerintah," katanya.
Mataram (ANTARA) - Tim Global Wakaf Aksi Cepat Tanggap (ACT) Cabang Nusa Tenggara Barat meresmikan ritel wakaf ke-7 yang merupakan wadah menggerakkan ekonomi umat di Pulau Lombok, Sabtu.
Ritel wakaf ke-7 yang berlokasi di SDIT Anak Sholeh 1 Mataram tersebut diresmikan oleh Head Partnership Global Wakaf ACT NTB Juaini Pratama bersama Direktur SDIT Anak Sholeh 1 Mataram, Wahidah.
"Pendirian ritel wakaf tersebut adalah salah satu dari sekian banyak program pengembangan ekonomi keummatan yang dijalankan Global Wakaf ACT sejak 2018 lalu," kata Juaini.
SDIT Anak Sholeh 1 Mataram, kata dia, adalah mitra ke-7 yang dipilih menjadi lokasi pembangunan ritel wakaf karena merupakan mitra Global Wakaf ACT sejak awal.
"Lokasi ini dipilih karena selain potensial, SDIT Anak Sholeh juga merupakan mitra ACT dalam banyak kegiatan," katanya.
Ia mengatakan dasar pemikiran program pengembangan ekonomi melalui pendirian ritel wakaf sejatinya adalah untuk kembali mengajak ummat berjamaah dalam hal ekonomi. Karena selama ini, umat hanya dihadapkan pada pemahaman bahwa berjamaah itu hanya dalam ibadah shalat saja.
Juaini juga mengungkapkan bahwa belanja di retail wakaf sudah termasuk wakaf yang akan disalurkan melalui Global Wakaf selaku "nazhir".
"Hal itu karena sebagian keuntungan juga akan digunakan untuk membangun usaha-usaha sejenis dalam rangka pengembangan ekonomi keummatan," kata Juaini Pratama.
Direktur SDIT Anak Sholeh 1 Mataram Wahidah sangat mengapresiasi program-program pengembangan ekonomi umat yang dilaksanakan oleh Global Wakaf dan ACT yang diimplementasikan di Pulau Lombok khususnya, dan NTB pada umumnya.
"Semakin banyak suatu lembaga pendidikan bermitra dengan lembaga-lembaga luar, maka hal itu menjadi nilai lebih dalam akreditasi lembaga pendidikan tersebut," demikian Wahidah.
(Bloomberg) -- The first U.S. coronavirus death. Signs the outbreak is squeezing China’s economy. A possible outbreak in Washington State. Trading may have stopped, but the drumbeat of alarming headlines hasn’t. That’s making investors anxious about what happens when markets reopen.
While considerable bad news has been priced in to stocks, with the S&P 500 down 13% in seven sessions and volatility surging, markets have to date been helpless to right themselves amid a torrent of virus-related headlines that continued into Saturday.
“The news flow today is quite negative and it will make the narrative between now and Monday morning even more important than it was on Friday,” said Matt Maley, an equity strategist at Miller Tabak & Co., warning that it’s still too early for worst-case scenarios. “That said, today’s markets are highly impacted by momentum-based mechanized trading. If things get going in one direction, it’s very hard to turn around.”
Most investors reached on Saturday counseled perspective, saying that after the worst plunge since 2008, the market is making progress adjusting to slower economic growth and the disease’s human toll. Versus expected earnings, U.S. stocks trade at roughly the five-year average relative to expected earnings.
“What is critical from an investor perspective is the market has significantly marked down on those fears,” said David Katz, chief investment officer at Matrix Asset Advisors in Westchester, New York. “As the news comes out over the next few weeks, a lot has been discounted already.”
At an afternoon press conference to announce new steps to halt the disease’s spread, President Donald Trump said “markets will all come back” from the sell-off that has erased $6 trillion from global equities. He urged the Federal Reserve to “do its job” and cut interest rates while his administration focuses on public safety. On Friday, Fed Chairman Jerome Powell said the virus poses evolving risks to the economy and signaled the central bank is prepared to cut interest rates if necessary.
“It’s certainly not a good situation, when you lose travel that’s a big part of the market, but for a period of time we’re going to have to do whatever is necessary,” Trump said. “Safety, health, number one -- the markets will take care of themselves. The companies are very powerful, our consumer has never been in a better position than they are right now.”
A patient Trump described as “medically high risk” from Washington state became the first confirmed U.S. fatality linked to the coronavirus. Washington state health officials had earlier identified two new cases, including a person who had no known travel history or encountered anyone who had visited affected areas.
Data Hit
Highlighting the virus’s economic toll, data Saturday from China’s National Bureau of Statistics showed activity in the country’s manufacturing sector contracted sharply in February, with the official gauge hitting the lowest level on record. The manufacturing purchasing managers’ index plunged to 35.7 in February from 50 the previous month, much lower than economists predicted.
“It’s absolutely worse as a drip of news,” said Nathan Thooft, Manulife Asset Management’s head of global asset allocation. “Investors want certainty whether good or bad. A drip, drip of news leaves the uncertainty door wide open.”
Late Saturday, Washington State officials said they are investigating a potential outbreak of coronavirus at a health facility that cares for elderly, vulnerable patients, after two people at the facility were infected. More than 50 residents and staff at the facility have shown symptoms of a respiratory illness, according to Jeff Duchin, health officer for public health in Seattle and King County.
From its closing level of 2,954.22 Friday, the S&P 500 would need to fall another 8.3% to complete the 20% tumble that traditionally signifies a bear market. No such decline has occurred in U.S. indexes since March 2009, making the rally that began in that month by some measures the longest ever.
“My belief is that this is a correction and not the end of the bull market,” said Chris Zaccarelli, chief investment officer of Davidson Advisory Group. “We are likely to have an economic shock here in the U.S., but I don’t believe we will get two consecutive quarters of negative GDP growth. Because we won’t get a recession due to the coronavirus, the bull market will continue.”
Futures trading in U.S. equity indexes resume at 6 p.m. New York time Sunday.
--With assistance from Claire Ballentine.
To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, James Ludden
For more articles like this, please visit us at bloomberg.com
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That's not a statement of doom. It's one based on history. At some point, the market will crash. Whether it be soon because of the coronavirus, or down the road due to reasons we don't see yet, it's going to happen.
It may not be possible to know when a crash is coming, but it is possible to prepare your portfolio for the inevitable. All three of these stocks make sense to own now, and they give you a measure of protection in the event of a market crash.
Warehouse clubs are well-positioned to be well in a down economy. Image source: Walmart.
Costco
The warehouse club chain offers low prices and has incredibly high (roughly 90%) retention rates for its members. Costco(NASDAQ:COST) makes most of its profit from those members, and more people are likely to join in order to get access to the chain's cheap groceries, household goods, and assorted other items.
Costco's success is not tied to whether the economy is healthy. In fact, you could argue that consumers have more reasons to shop there during a recession or other financial downturn.
Dollar General
Dollar General(NYSE:DG) serves neighborhoods. Few, if any, people who shop at the chain go out of their way to get there. Instead, the company puts locations where they can serve a local community -- often one that is underserved by grocery chains.
When the economy tanks, people still need to eat. They still need toilet paper and other essentials. Dollar General offers all of those at cheap prices in locations that are easy to get to for their core customer base.
Walmart
Walmart(NYSE:WMT) will thrive during a market crash because, like the other two companies on this list, it offers consumers good bang for their buck. In a struggling economy, people will think twice about going to Whole Foods or paying more for grocery delivery.
They may also look to save money on clothing, household items, and pretty much anything else that they buy. Walmart checks off all of those boxes. The chain sells pretty much everything, and it has the Sam's Club warehouse chain as well, which offers the same value proposition as Costco.
Be careful, don't panic
A market crash only hurts you if you need money now. In many cases, it's a buying opportunity wherein you have a chance to build (or increase) positions in good companies that have the strength to weather the downturn.
If you're worried about a crash, however, it's smart to buy companies that thrive no matter what the economic conditions. That's not to say that Costco, Dollar General, and Walmart may not see their stock prices fall during a crash, but all three are well-positioned to recover fast.
When the market crashes, it's important not to panic. Remember why you bought the stocks in your portfolio in the first place. If those reasons remain true, then a downturn or crash is nothing more than a speedbump slightly slowing down your long-term plans.
Chief economist with Deutsche Bank Torsten Slok discusses what to expect from markets in the coming weeks amid coronavirus fears.
To state the obvious, the stock market is a little scary these days.
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A viral outbreak has spread to nearly 60 countries and shows little sign of abating. That in turn has stirred worries about the economy on a global scale.
A woman wearing a face mask walks near a board displaying the foreign currencies in downtown Seoul, South Korea, Saturday, Feb. 29, 2020. (AP Photo/Lee Jin-man)
Now, the stock market has surrendered five months' worth of gains in an alarmingly short amount of time. Investors can find it difficult to stay the course when uncertainty rules, but experts say that is precisely when they should do so.
“Ultimately no one knows what will happen, and that's why it is important to avoid rash reactions when markets get shaky,” said Corbin Blackwell, a financial planner with online investment firm Betterment.
Investments should be made as part of a long-term plan. And those plans won’t be entirely upended by short-term ups and downs.
What about the 11.5% drop in the S&P 500 this week? It sounds big, but it represents just a fraction of the gains of the past decade, during which time investors benefited from the longest bull market of all time. The index is still up 337% since March 9, 2009, the start of the bull run.
In this Wednesday, Feb. 26, 2020, file photo, stock trader Gregory Rowe works at the New York Stock Exchange. (AP Photo/Mark Lennihan, File)
If you are still uneasy, check in with your financial planner or investment firm. They can let you know if your plan is on track.
Now might be a good time to rebalance your portfolio, to make sure you are holding the right mix of assets for your goals. After all these years of big market gains, some people may have more weight in stocks than they need. Some people may want to take advantage of a dip to buy stocks.
J.J. Kinahan, chief strategist with TD Ameritrade, says investors sometimes make the mistake of being either all in or all out when it comes to their approach to investing in the stock market.
“For those who use the dip as a buying opportunity, buy a small amount. If we do (fall) further, it gives you another buying opportunity at a better price.”
If you are considering retirement in the next few years and are getting nervous about market volatility, Blackwell said decreasing exposure to stocks might help you sleep better at night.
Any money you need in the next few years shouldn’t be invested in stocks. So, make some minor adjustments based on your needs but avoid the urge to sell off all the stock holdings in your retirement account because you may need something to last you 20 years or more.
And panicking can cost you: There are fees, taxes and lost potential gains. Think of the people who sold off at the market’s bottom during the Great Recession and missed out on some of the greatest gains of all time in the recovery that followed.
“Market volatility is scary and nerve-wracking to watch,” said Andrew Meadows, a senior vice president at Ubiquity Retirement + Savings, a retirement plan provider based in San Francisco. But he reminds people that much of the action investors are seeing in the market right now is short term.
If you simply must do something, build up emergency savings.
Americans are woefully unprepared for financial disruptions such as a major expense, illness or job loss. Having a little extra stashed away could help if you face job loss, illness or even time away from work for a quarantine. But more likely, it will keep you financial protected for any challenge that is thrown your way.
A historic week for the stock market ended with a big, fat question mark: what will the government and the Federal Reserve do about the coronavirus outbreak that threatens to decimate the longest-running bull market on record?
The infectious disease, Covid-19, which reportedly originated in Wuhan, China, late last year, reached viral proportions this week on Wall Street—and literally throughout the world.
Cases of the illness have stabilized in China, but its spread outside the country, nearly 60 in total, is what may have truly injected uneasiness into markets (see attached FactSet chart).
Approximately 84,000 cases have emerged, and almost 2,900 people have died, with several countries reporting their first incidences of Covid-19, including Brazil, Georgia, New Zealand and Norway.
In an op-ed in the New England Journal of Medicine on Friday Microsoft co-founder Bill Gates said the outbreak could be a once-in-a-century pandemic. “The data so far suggest that the virus has a case fatality risk around 1%; this rate would make it many times more severe than typical seasonal influenza, putting it somewhere between the 1957 influenza pandemic (0.6%) and the 1918 influenza pandemic (2%),” he wrote, adding that the Bill and Melinda Gates Foundation has committed substantial resources to prevent such diseases.
Those factors have, perhaps, sent risk assets into virtual free fall this week after mostly shaking off developments related to the virus since at the start of the year.
The structural damage to Wall Street’s bullish patina is undeniable, as the Dow Jones Industrial Average DJIA, -1.39%, the S&P 500 SPX, -0.82% and the Nasdaq Composite COMP, +0.01% indexes booked their worst weekly declines since the 2008 financial crisis and all three stock gauges fell into correction (a drop of at least 10% from a recent peak).
Those statistics don’t necessarily capture the severity and velocity of the move for stocks, which had only days before been putting in all-time highs. Indeed, the deterioration from the peak has been nothing short of breathtaking, highlighted by the S&P 500’s fastest slide from a record close to correction in history on Thursday.
All totaled, global equity markets wiped out $7 trillion from the Feb. 19 record for the S&P 500 and the U.S. market alone lost $4.3 trillion, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
More than 70% of the S&P 500 is now in correction territory or worse. By another measure, only two companies ended positive for the week in the entire S&P 500: Regeneron PharmaceuticalsREGN, +3.00%, up 10.3%, and chip stockQorvo Inc. QRVO, +6.10%, with a weekly gain of 2.4%.
Here are the top 10 worst performers in the S&P 500 from the week, according to Dow Jones Market Data:
Reports late Friday from the Washington Post (paywall) suggested that the Trump administration may be discussing ways to avert further damage to the market and prevent a pronounced slowdown in the domestic economy. Proposals reportedly included fiscal measures like targeted tax cuts and other emergency actions.
CNBC reported that Trump has leaned on the Federal Reserve to intervene to help address the possible the fallout from the spread of coronavirus.
Fed Chairman Powell midday Friday delivered a rare, unscheduled statement, saying that the virus posed an “evolving risk,” and reiterated that he was closely monitoring the outbreak, which market participants took as implying that the central bank might be ready to cut rates further from the current 1.50-1.75% range. Markets are pricing in two Fed rates cuts for this year, with the 10-year Treasury TMUBMUSD10Y, +0.00% yield, which moves opposite to price, ending Friday at a record low at 1.127%.
During a CNBC interview Former Federal Reserve Gov. Kevin Warsh argued in an op-ed in the Wall Street Journal that the central bank should take “immediate action” and jointly cut interest rates and explained his view on CNBC as well.
Reuters also reported on Friday that global central banks may be inclined to kick off efforts, if not coordinated moves, to help stem the expected problems from the spread of the illness.
‘But at this stage, how much help can additional rate cuts really offer?’
What makes the epidemic unique for financial markets is it has resulted in a rout driven by an event that is nonfinancial in nature and hard to incorporate into financial models.
How do you solve a problem like a virus?
Natural disasters have a sense of finality, trade wars may eventually be resolved, but the coronavirus has the potential to deliver lasting disruption to supply chains. And to think, the markets had been fretting a few short months ago about an unceasing tariff clash between China and the U.S.
“No matter how much the Fed cuts rates and stimulates consumer demand, it cannot eradicate the need for quarantine and travel barriers to arrest the spread of infection,” wrote Seema Shah, chief strategist at Principal Global Investors, in a Friday blog post.
It isn’t clear that the central bank can deliver the stimulus necessary to inoculate financial markets from fears of an infectious disease that could hinder growth and that has already dented China, the second-largest economy in the world.
Reports out of Beijing, Saturday local time, indicated that the country’s manufacturing activity for February fell to a record low. The official manufacturing purchasing managers index tumbled to 35.7 from 50 last month. Any reading below 50 signals contracting conditions. A separate reading on service also fell to record low, hitting 29.6 compared with 54.1 in January.
“Movement and activity is restricted in China, and China is at the center of many critical global supply chains,” wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management, in a Friday research note before the data was released.
“Research suggests that even today about two-thirds of factories in China are still not operating properly, lacking supplies and labor,” she said.
Ultimately, the “most immediate impact of the growing spread of the coronavirus is on sentiment: People are fearful,” she said.
But it is the economic impact that investors are struggling to calculate. However, it is difficult to forecast for an epidemic that may hamstring developed economies for an undefined period. Morgan Stanley analysts on Friday speculated that three scenarios could play out for the epidemic and markets:
. Containment by March: The virus outbreak is contained by March end and production activity in China normalizes around mid to late March, limiting the disruption to 1Q20. Global growth dips to 2.5%Y in 1Q20 (from 2.9%Y in 4Q19), but recovers meaningfully from 2Q
. Escalation in new geographies, disruption extends into 2Q20: New cases continue to rise in other parts of the world, before peaking by May end. The disruption extends into 2Q20. Global growth averages just 2.4%Y in 1H20, but picks up from 3Q20.
. Persisting into 3Q, escalating recession risks: The virus continues to spread into 3Q, encompassing all the large economies. China faces a renewed rise in new cases as it restarts production. Disruption continues into 3Q. Global growth stays weak between 1Q-3Q20. Extended disruption brings the risk of damage to corporate profitability and a rise in corporate credit risks.
Already pre-emptive restrictions on travel are taking place in the U.S. Indeed, a number of corporations are advising employees to defer and limit certain types of travel both professionally and personally.
Central banks cannot, some strategists and economists argue, cure economies that are slowing due to a viral outbreak.
“It surely won’t take too much more negative economic data and infection news to prompt the Fed to deliver the rate cut the market is pleading for. But at this stage, how much help can additional rate cuts really offer?” Shah wrote.
That may explain why Powell’s comments on Friday offered only cold comfort for investors rattled by the epidemic and their inability to predict.
The result is that this downturn may be more than just a garden-variety correction and could possibly be a downturn that could send stocks into a bear market, ending a lengthy bull-run in its 12th year, some analysts forecast. That’s hard to fathom with a jobs market that has been outstanding and other parts of the economy that have been humming along.
However, the recent slide in markets has tightened financial conditions by one measure, according to Oxford Economics, which shows that one indicator of stress in the market is at its highest level since before Powell & Co. embarked upon a series of three, consecutive quarter-percentage point rate cuts in 2019:
MarketWatch’s Joy Wiltermuth reported that cracks are, indeed, beginning to form. She said speculative-grade, or “junk-bonds,” saw credit spreads gap out by 100 basis points. Debt widening out is an indication of souring sentiment and rising costs in a key area of funding for corporations. Energy bonds have taken the brunt of the pain as crude-oil prices CL00, +1.12% have been one of the main casualties of the coronavirus outbreak because investors fear that the demand for crude could be hurt by the epidemic.
Oxford Economics forecasts that the U.S. economic expansion will be hurt, if the virus turns into something that is eventually classified as a pandemic by the World Health Organization.
“Our upcoming baseline will feature 2020 US GDP growth around 1.4% and Q1 growth flirting with zero. The second quarter is also likely to remain lackluster at 1.3%,” wrote senior U.S. economist at Lydia Boussour (see chart attached):
“Factoring the possibility of a coronavirus-lockdown in the US, we believe risks are heavily skewed to the downside,” she wrote.
Volatility’s rise
Markets were certainly trading as if risks were skewed lower. Investors said that the action was characteristic of market that is selling off, with stocks and so-called safe-haven assets like gold also dumped indiscriminately.
One reason for the trading action has been compliance officers tightening the reins on trading shops and forcing investors to adopt more neutral positions, neither long nor short, as the week of selling intensified in the latter half of the week and altered the balance of investor portfolios.
“I think we’ve gone from de-risking to de-grossing,” Peter Tchir, head of macro strategy at Academy Securities told MarketWatch Friday midday. “People are being told to reduce their position sizes: ‘let’s just cut the long and the shorts’,” he explained of the strategies.
Some of that action may explain why gold GCJ20, +1.31% was driven to its worst daily loss in seven years even as the stock market, which usually moves in the opposite direction of bullion, notched its worst week in 12 years. Investors also may have been forced to sell gold, which already had a powerful run-up before this selloff, to meet margin calls, some strategists speculated.
Breakdowns in such correlations Tchir said are a signature feature of a market that is unwinding in a spectacular fashion. That includes previously beaten-down stocks like travel services and cruise operators like TripAdvisor Inc. TRIP, +3.21%, Booking Holdings Inc. BKNG, +2.16%, Royal Caribbean Cruises LtdRCL, +4.43%, Norwegian Cruise Line Holdings Ltd. NCLH, +7.25% and Royal Caribbean Cruises LtdRCL, +4.43%, which all rose when they ought not to in an outbreak scenario.
The curious movements also came with a spike in volatility, with the Cboe Volatility Index VIX, +2.43%, a gauge of expected volatility, jumped to 40.11, marking its loftiest close since August of 2015, according to FactSet data.
In intraday terms, the Nasdaq Composite, which finished Friday’s trade in positive territory, for example, had been down by as much as 3.5% earlier in the session until notching its sharpest reversal since 2008, according to Dow Jones Market Data.
The stunning moves likely suggest that market may be nearing a so-called bottom—or simply unable to find purchase in this environment. But where things stand is anyone’s guess.
Traders said that the bulk of trading hasn’t felt panicky but noted that volatility borne of a virus is a different variable for investors to compute.
When will things level out?
Jason Katz, a UBS managing director and senior portfolio manager, on CNBC may have put it best: “We don’t need a rate cut, we need a vaccine,” he said. “And the only cure [the market needs] is time.”
Katz said he was advising his clients to use the weekend to “take a deep breath,” and said that corrections are par for the course even if this week felt less than normal.
That may turn out to be sage advice, even if taking that deep breath happens to be behind a N95 respirator mask.
Check out the CNBC video below:
Week ahead
Here’s what the week ahead looks like with the Friday jobs report likely the most important data point:
A historic week for the stock market ended with a big, fat question mark: what will the government and the Federal Reserve do about the coronavirus outbreak that threatens to decimate the longest-running bull market on record?
The infectious disease, Covid-19, which reportedly originated in Wuhan, China, late last year, reached viral proportions this week on Wall Street—and literally throughout the world.
Cases of the illness have stabilized in China, but its spread outside the country, nearly 60 in total, is what may have truly injected uneasiness into markets (see attached FactSet chart).
Approximately 84,000 cases have emerged, and almost 2,900 people have died, with several countries reporting their first incidences of Covid-19, including Brazil, Georgia, New Zealand and Norway.
In an op-ed in the New England Journal of Medicine on Friday Microsoft co-founder Bill Gates said the outbreak could be a once-in-a-century pandemic. “The data so far suggest that the virus has a case fatality risk around 1%; this rate would make it many times more severe than typical seasonal influenza, putting it somewhere between the 1957 influenza pandemic (0.6%) and the 1918 influenza pandemic (2%),” he wrote, adding that the Bill and Melinda Gates Foundation has committed substantial resources to prevent such diseases.
Those factors have, perhaps, sent risk assets into virtual free fall this week after mostly shaking off developments related to the virus since at the start of the year.
The structural damage to Wall Street’s bullish patina is undeniable, as the Dow Jones Industrial Average DJIA-1.39% the S&P 500 SPX-0.82% and the Nasdaq Composite COMP+0.01% indexes booked their worst weekly declines since the 2008 financial crisis and all three stock gauges fell into correction (a drop of at least 10% from a recent peak).
Those statistics don’t necessarily capture the severity and velocity of the move for stocks, which had only days before been putting in all-time highs. Indeed, the deterioration from the peak has been nothing short of breathtaking, highlighted by the S&P 500’s fastest slide from a record close to correction in history on Thursday.
All totaled, global equity markets wiped out $7 trillion from the Feb. 19 record for the S&P 500 and the U.S. market alone lost $4.3 trillion, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
More than 70% of the S&P 500 is now in correction territory or worse. By another measure, only two companies ended positive for the week in the entire S&P 500: Regeneron PharmaceuticalsREGN+3% up 10.3%, and chip stockQorvo Inc. QRVO+6.1% with a weekly gain of 2.4%.
Here are the top 10 worst performers in the S&P 500 from the week, according to Dow Jones Market Data:
Reports late Friday from the Washington Post (paywall) suggested that the Trump administration may be discussing ways to avert further damage to the market and prevent a pronounced slowdown in the domestic economy. Proposals reportedly included fiscal measures like targeted tax cuts and other emergency actions.
CNBC reported that Trump has leaned on the Federal Reserve to intervene to help address the possible the fallout from the spread of coronavirus.
Fed Chairman Powell midday Friday delivered a rare, unscheduled statement, saying that the virus posed an “evolving risk,” and reiterated that he was closely monitoring the outbreak, which market participants took as implying that the central bank might be ready to cut rates further from the current 1.50-1.75% range. Markets are pricing in two Fed rates cuts for this year, with the 10-year Treasury BX:TMUBMUSD10Y yield, which moves opposite to price, ending Friday at a record low at 1.127%.
During a CNBC interview Former Federal Reserve Gov. Kevin Warsh argued in an op-ed in the Wall Street Journal that the central bank should take “immediate action” and jointly cut interest rates and explained his view on CNBC as well.
Reuters also reported on Friday that global central banks may be inclined to kick off efforts, if not coordinated moves, to help stem the expected problems from the spread of the illness.
‘But at this stage, how much help can additional rate cuts really offer?’
Seema Shah, chief strategist at Principal Global Investors
What makes the epidemic unique for financial markets is it has resulted in a rout driven by an event that is nonfinancial in nature and hard to incorporate into financial models.
How do you solve a problem like a virus?
Natural disasters have a sense of finality, trade wars may eventually be resolved, but the coronavirus has the potential to deliver lasting disruption to supply chains. And to think, the markets had been fretting a few short months ago about an unceasing tariff clash between China and the U.S.
“No matter how much the Fed cuts rates and stimulates consumer demand, it cannot eradicate the need for quarantine and travel barriers to arrest the spread of infection,” wrote Seema Shah, chief strategist at Principal Global Investors, in a Friday blog post.
It isn’t clear that the central bank can deliver the stimulus necessary to inoculate financial markets from fears of an infectious disease that could hinder growth and that has already dented China, the second-largest economy in the world.
Reports out of Beijing, Saturday local time, indicated that the country’s manufacturing activity for February fell to a record low. The official manufacturing purchasing managers index tumbled to 35.7 from 50 last month. Any reading below 50 signals contracting conditions. A separate reading on service also fell to record low, hitting 29.6 compared with 54.1 in January.
“Movement and activity is restricted in China, and China is at the center of many critical global supply chains,” wrote Katie Nixon, chief investment officer at Northern Trust Wealth Management, in a Friday research note before the data was released.
“Research suggests that even today about two-thirds of factories in China are still not operating properly, lacking supplies and labor,” she said.
Ultimately, the “most immediate impact of the growing spread of the coronavirus is on sentiment: People are fearful,” she said.
But it is the economic impact that investors are struggling to calculate. However, it is difficult to forecast for an epidemic that may hamstring developed economies for an undefined period. Morgan Stanley analysts on Friday speculated that three scenarios could play out for the epidemic and markets:
. Containment by March: The virus outbreak is contained by March end and production activity in China normalizes around mid to late March, limiting the disruption to 1Q20. Global growth dips to 2.5%Y in 1Q20 (from 2.9%Y in 4Q19), but recovers meaningfully from 2Q
. Escalation in new geographies, disruption extends into 2Q20: New cases continue to rise in other parts of the world, before peaking by May end. The disruption extends into 2Q20. Global growth averages just 2.4%Y in 1H20, but picks up from 3Q20.
. Persisting into 3Q, escalating recession risks: The virus continues to spread into 3Q, encompassing all the large economies. China faces a renewed rise in new cases as it restarts production. Disruption continues into 3Q. Global growth stays weak between 1Q-3Q20. Extended disruption brings the risk of damage to corporate profitability and a rise in corporate credit risks.
Already pre-emptive restrictions on travel are taking place in the U.S. Indeed, a number of corporations are advising employees to defer and limit certain types of travel both professionally and personally.
Central banks cannot, some strategists and economists argue, cure economies that are slowing due to a viral outbreak.
“It surely won’t take too much more negative economic data and infection news to prompt the Fed to deliver the rate cut the market is pleading for. But at this stage, how much help can additional rate cuts really offer?” Shah wrote.
That may explain why Powell’s comments on Friday offered only cold comfort for investors rattled by the epidemic and their inability to predict.
The result is that this downturn may be more than just a garden-variety correction and could possibly be a downturn that could send stocks into a bear market, ending a lengthy bull-run in its 12th year, some analysts forecast. That’s hard to fathom with a jobs market that has been outstanding and other parts of the economy that have been humming along.
However, the recent slide in markets has tightened financial conditions by one measure, according to Oxford Economics, which shows that one indicator of stress in the market is at its highest level since before Powell & Co. embarked upon a series of three, consecutive quarter-percentage point rate cuts in 2019:
MarketWatch’s Joy Wiltermuth reported that cracks are, indeed, beginning to form. She said speculative-grade, or “junk-bonds,” saw credit spreads gap out by 100 basis points. Debt widening out is an indication of souring sentiment and rising costs in a key area of funding for corporations. Energy bonds have taken the brunt of the pain as crude-oil prices CL00+1.12% have been one of the main casualties of the coronavirus outbreak because investors fear that the demand for crude could be hurt by the epidemic.
Oxford Economics forecasts that the U.S. economic expansion will be hurt, if the virus turns into something that is eventually classified as a pandemic by the World Health Organization.
“Our upcoming baseline will feature 2020 US GDP growth around 1.4% and Q1 growth flirting with zero. The second quarter is also likely to remain lackluster at 1.3%,” wrote senior U.S. economist at Lydia Boussour (see chart attached):
“Factoring the possibility of a coronavirus-lockdown in the US, we believe risks are heavily skewed to the downside,” she wrote.
Volatility’s rise
Markets were certainly trading as if risks were skewed lower. Investors said that the action was characteristic of market that is selling off, with stocks and so-called safe-haven assets like gold also dumped indiscriminately.
One reason for the trading action has been compliance officers tightening the reins on trading shops and forcing investors to adopt more neutral positions, neither long nor short, as the week of selling intensified in the latter half of the week and altered the balance of investor portfolios.
“I think we’ve gone from de-risking to de-grossing,” Peter Tchir, head of macro strategy at Academy Securities told MarketWatch Friday midday. “People are being told to reduce their position sizes: ‘let’s just cut the long and the shorts’,” he explained of the strategies.
Some of that action may explain why gold GCJ20+1.31% was driven to its worst daily loss in seven years even as the stock market, which usually moves in the opposite direction of bullion, notched its worst week in 12 years. Investors also may have been forced to sell gold, which already had a powerful run-up before this selloff, to meet margin calls, some strategists speculated.
Breakdowns in such correlations Tchir said are a signature feature of a market that is unwinding in a spectacular fashion. That includes previously beaten-down stocks like travel services and cruise operators like TripAdvisor Inc. TRIP+3.21%Booking Holdings Inc. BKNG+2.16%Royal Caribbean Cruises LtdRCL+4.43%Norwegian Cruise Line Holdings Ltd. NCLH+7.25% and Royal Caribbean Cruises LtdRCL+4.43% which all rose when they ought not to in an outbreak scenario.
The curious movements also came with a spike in volatility, with the Cboe Volatility Index VIX+2.43% a gauge of expected volatility, jumped to 40.11, marking its loftiest close since August of 2015, according to FactSet data.
In intraday terms, the Nasdaq Composite, which finished Friday’s trade in positive territory, for example, had been down by as much as 3.5% earlier in the session until notching its sharpest reversal since 2008, according to Dow Jones Market Data.
The stunning moves likely suggest that market may be nearing a so-called bottom—or simply unable to find purchase in this environment. But where things stand is anyone’s guess.
Traders said that the bulk of trading hasn’t felt panicky but noted that volatility borne of a virus is a different variable for investors to compute.
When will things level out?
Jason Katz, a UBS managing director and senior portfolio manager, on CNBC may have put it best: “We don’t need a rate cut, we need a vaccine,” he said. “And the only cure [the market needs] is time.”
Katz said he was advising his clients to use the weekend to “take a deep breath,” and said that corrections are par for the course even if this week felt less than normal.
That may turn out to be sage advice, even if taking that deep breath happens to be behind a N95 respirator mask.
Check out the CNBC video below:
Week ahead
Here’s what the week ahead looks like with the Friday jobs report likely the most important data point:
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