Black Monday 2020, March 9, could be described in many different ways. It may go down as one of the biggest events in New York Stock Exchange history. Everything from major losses to trading stoppages – you had all the storylines in this drama and tragedy. So, what happened? Here is everything you wanted to know about Black Monday but were too afraid to ask.
It was a long Black Monday for investors – professional and retail – as a sea of losses swallowed portfolios across the United States. It was not pretty.
For the first time in more than 20 years, the market-wide circuit breakers were tested – meaning that when such enormous and fast drops occur, trading is suspended for a short time. At 9:33 a.m., the entire trading market was halted for 15 minutes. At 10 a.m. and 10:22 a.m., two individual trading halts occurred. The purpose behind these circuit breakers is to allow traders to catch their breath, realize that the world is not coming to an end, sip on a cup of tea, and determine if they want to buy or sell. Critics say it is an anti-free market mechanism, while others say it is a necessary intervention.
If I Had a Million Dollars
How do you know when the market crash is just too crazy? When an investment vehicle soars 300,000% in just five minutes. That is exactly what happened to iShares International Treasury Bond ETF (IGOV), which went from $53.40 to $199,999.98 and then crashed back down to $53.09. It has not been confirmed what happened, but it could have been a computer glitch. Whatever the case, if you held at least five shares, you were a millionaire for 95 minutes!
Where Were You in January 1991?
Crude oil experienced its largest single-day percentage crash since January 1991, cratering 25% to a four-year low of about $31 per barrel. International oil markets are preparing for a price war between Russia and Saudi Arabia as the two energy powerhouses might flood the world with crude following a breakdown in negotiations.
Traders sought shelter in U.S. Treasurys. Investors fled to the 10-year Treasury note, which caused it to touch an all-time low of 0.318% briefly. It eventually recovered and was trading at around 0.65%, but some analysts are warning that it could slip into subzero territory if the market meltdown persists.
Bust or Panic?
Are we in the bust phase of the business cycle, or is this just chaos created by COVID-19 and crude oil? The latter is far more likely since all the evidence points to supply and demand woes and panic over the virus rather than monetary policy issues.
Time will tell if the coming sessions are just a calm before the next storm.