The bull was killed by a wave of hysteria, panic & fearmongering. The media focus on negative news and they present them as alarmist as possible. Fear brings them clicks and more advertisers. The meltdown was aggravated by massive short-selling (borrowing stocks and selling them immediately in the hope to repurchase them later much cheaper).
The crash was also caused by the incompetence of American politicians & bureaucrats. We have still to wait that the IRS postpones the tax deadline from April 15, which could give some relief. President Trump mulled about tax cuts, but nothing happened so far. The authorities are quick to imply travel bans and quarantines, but the bureaucrats take time to deliver the economic stimulus which would be necessary to sooth the panic. What about temporary helps for airlines, hotels and other industries who suffer from the panic, what about a tax holiday?
There are also some political groups who are surely happy with a crash and a bear market because sharply falling stocks could reduce the chance that President Trump will be reelected in November. Some people might celebrate the recent sell-off - and they might even have helped it by massively short-selling.
Anyway, I believe that the longest bull market in history will be followed by one of the shortest bear markets in history. “The stock market has predicted nine of the last five recessions” joked once economist and Nobel prize winner Paul Samuelson (wikiquote ). The coronavirus won`t push US economy into a recession, even though some political groups hope that an economic downturn could kick Trump out of office.
In China the crisis has already peaked and the Peoples Republic is going back to work. I think that quarantines, travel bans and cautious behavior (handwashing, fewer body contacts etc.) will constrain the epidemic and economy & stock market will recover soon. In a briefing to a House committee, Anthony Fauci, the head of the National Institute of Allergy and Infectious Diseases (NIAID), said he is "hopeful" that the first patient will receive a coronavirus vaccine in a few weeks (/seekingalpha).
I am aware that big events like the Coachella Valley Music and Arts Festival or the Austin Music & Arts Festival are cancelled or postponed and that airlines, hotels, cruise ship operators and others are hit. But the majority of the US economy is still sound. New York City, where I live, shows business as usual. Streets, subways, shops, restaurants, delis, pubs, gyms, public pools and other places are crowded as always. The Weekly Initial Unemployment Claims, the most recent economic indicator, decreased to 211,000, close to an all-time low. And the US Energy Information Administration reported that domestic oil & gasoline demand increased ( aaa). Where is the crisis?
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There are already two strong market movements which are compensating most of the perilous coronavirus influence on the general economy. Oil prices are in free fall. Brent Crude & WTi, the futures for global & American oil, dropped about 50% since begin of the year (charts above). Gasoline prices are following. There are 3 reasons for that. A rising oil glut, thanks to American fracking, the fear that the coronavirus reduces oil demand (less traveling) and a price war started by the Saudis to wipe out US competitors.
Dropping costs for gasoline & natural gas work like a giant tax cut. The price war on the oil market is a gift for the global economy. Imploding oil prices are a huge stimulus program because consumers have more money to spend and corporations have less costs. Therefore consumer spending, which is about 70% of the US GDP, should stay robust. Spending for renting should be immune to the virus, spending for health care might even rise. People might travel less, might go out less and visit fewer shops & restaurants, but they may shop more online and many might work from home. It is possible that the virus - and measures against it like quarantines - alter the behavior. We learned from China that there more people are working, learning & shopping from home which is fostering digitization and so rising efficiency & productivity of the economy ( driveby ). I believe that the negative coronavirus impact on real income, employment, industrial production and retail sales will be constrained and short lived - shorter than a quarter - and will be be followed by a v-shaped recovery.
(source )
Interest rates also have been falling sharply, caused by ongoing flight into safe haven (chart above). Lower costs for consumer credits, mortgages support investments & consumer spending. I assume that the double package of cheaper energy prices & credit costs will compensate most of the perilous impulse of the corona epidemic. As a result the US economy will avoid the recession the alarmist are predicting and the stock market will come back sooner than many think.
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