The longest bull market in American history -- over 11 years -- ended Thursday, with all three major U.S. indexes in bear market territory. Driving stocks down is an array of uncertainties and a speech from President Trump that included a travel ban.
Thursday, all the big indexes fell more than 7%, causing another circuit breaker, or a stoppage of trading. The S&P 500 is 23% below its all-time high, with the Dow Jones Industrial Average down 25% from that level and the Nasdaq 21% down. More money rushed into treasuries, bringing the yield down to 0.64%.
Wednesday evening, Trump said there will be a travel restriction on all non-U.S. citizens from Europe to the states. That sent airline stocks into yet another tizzy. United Airlines (UAL) - Get Report share fell more than 15% and is down and down 53% from its 2019 high.
Trump also made little comment on details of the fiscal stimulus plan he has spoken of this week. That plan gave markets a jolt earlier in the week and it included a reduction to the payroll tax, which could provide some support to profit margins.
Investors are fearful that we are already in a recession, for which the data has not yet been reported. The Federal Reserve implemented a 50 basis point cut to its benchmark lending rate, but capital has still flocked into treasuries so much that long-dated bonds are yielding less than the federal funds rate of just above 1%.
Many point out that lower rates -- implemented to aid a recovery -- can't get scared consumers and businesses out and about again.
"As Trump said ‘this is not a financial crisis’ but it is on the verge of becoming one of the severest economic meltdowns we have experienced over the past decades and unfortunately, the arms we have in disposition to combat a regular financial crisis doesn’t seem to work in this particular situation," said Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank. "We are not sure that companies could or would benefit fully from the massive monetary measures deployed by central banks in panic. Cheap lending is clearly not the answer to the specific problem we are facing today."
Mike Loewengart, head of investment strategy at E*Trade said "These are no doubt jarring times—investors should take this time to review their portfolio and make sure they’re comfortable with their level of risk. That said, don’t lose sight of the cornerstones of investing—maintain a long-term view and remain diversified."
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