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Broadway closed its curtains. The National Basketball Association has suspended its season. President Trump has declared a national emergency. And investors saw the Dow Jones Industrial Average experience its fastest drop in a bear market: a 20% drop from its 20-day peak, reflecting our growing uncertainty about a future shaped by the coronavirus pandemic. . After a chaotic week, we asked Matt Phillips, a markets reporter in the business office, to break the turmoil on Wall Street.
Explain to us last week. What happened?
Everyone knew the virus was spreading in China and compartmentalized it. At one point there was a psychological change and it seemed to be when the virus spread to Italy. As one of my sources said, a lot of Wall Street workers went to Italy. It wasn’t as “foreign” as people thought it was.
Then there was growing concern about our government’s response. President Trump had been very good to the stock market in many ways, but it seemed, speaking to people, that they feared there had been no serious response – especially when it came to testing. .
Wall Street is not warm and fuzzy. What they really want to see are numbers. They need estimates, they need forecasts, they need expectations. And if there aren’t any numbers to work with, then Wall Street doesn’t know what to do. The fact that there hasn’t been any substantial testing in the United States has driven the Street crazy.
Did last week’s stock market events surprise you?
I would never have predicted a collapse like we saw last week. With hindsight, everything seems obvious, but it’s not obvious when you’re at it. That was the end of the bull market, in part because the Federal Reserve, which has been like a huge wind blast at the back of the market for a decade, can’t fix it: it can’t print enough money to s ‘ensure that people do not get infected with the virus. It doesn’t matter what your mortgage rate is if you’re afraid to go to the bar and buy a beer.
You said there could be bigger problems for the financial system. Can you explain?
I don’t mean to be alarmist. It won’t be in 2008. It’s just that the financial system isn’t working the way it’s supposed to. When the economy is weak, the Fed lowers interest rates to lower the cost of borrowing for various things, like a mortgage. But due to the dysfunction of the Treasury market right now, mortgage rates have gone up. And that shouldn’t happen. And it shows that things are not working the way they should.
How did your sources react?
They say it’s scary. I just got an email from a guy saying, “It was the craziest week ever.” People in the stock market usually talk about generalities because details matter – it’s like a game of poker, no one gives their opinion. So for me, my job is more to try to take their temperature on what they think is driving the market and why it is changing. But no one really has a clue. We tend to anthropomorphize the stock market, but it’s really the sum of millions of people with millions of motivations taking millions of positions, so there’s never a single answer.
Things changed dramatically again after President Trump’s press conference on Friday.
Most of the stock market activity takes place at the start and end of the day. So the press conference was exactly the message investors wanted to hear, and it was delivered at the exact time that would have the most impact on the market. It is not a mistake that he delivered it at that time. He cares a lot about what the stock market does.
How does your coronavirus coverage compare to how you usually report on the stock market?
It got really crazy really fast so we just had to continue the story. It is very difficult to plan. For example, on Friday we thought we would have time to take a step back and say something more thematic about the economy. I wrote a whole story that exploded at the end of the day.
I have never seen something of this magnitude and so global. People will be stuck in their homes whether they have the money or not, so it’s hard to understand what this means for the United States if it gets worse.
Is there a silver lining to all this sadness?
Uh, well… (laughs). It’s a strange time. The problem with stocks is that you should be buying steadily over time, so I don’t put my money under the mattress. I’m still contributing to my 401 (k).
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