It’s time to pause the stock market for a few weeks
Despite warnings from the mega-rich, no one should be in a rush to restart business as usual until we’ve flattened the curve.
OPINION | The world is grinding to a halt in the face of COVID-19, and financial markets have been feeling that pain for some time now. The Dow Jones has been in a state of virtual free fall since late February, when fears about the virus spreading crept back into the news. Today, March 24, the Dow had its best day since 1933, as Congress neared a deal on its coronavirus relief package, but it was an anomaly; the larger trend says markets are on track to eliminate every single point the DJIA has gained since before President Trump took office, and every point the NASDAQ has gained in a year. Even the floor of the New York Stock Exchange has closed and moved to electronic-only trading for the first time in history, given social distancing and shelter-at-home rules in effect for New York City. On top of that, the S&P 500, one of the most well-known indicators of general market health to investors, has eliminated every gain since February of 2017.
Around the world, the situation looks just as dire. The Nikkei 225, Tokyo’s main index, just hit its five-year low. So has the FTSE 100, London’s main index. The Shanghai Composite Index is nearing that point as well.
The alarms that we ourselves as a nation have installed are currently firing. Domestically, any rapid decline in the S&P 500 triggers something called a “circuit breaker:” a temporarily halt on trading. Three levels of circuit breaker are set by the NYSE based on how much the S&P drops from previous day’s closing price: 7% (Level 1), 13% (Level 2), and 20% (Level 3). These are normal stopgaps meant to help investors understand the current situation, reconsider their trades, and think rationally. Last week, Level 1 was triggered three separate times — the first time such mechanisms have been fired off in years — and it’s not looking any more optimistic for this week. This morning, New York Governor Andrew Cuomo warned that the state was two weeks away from an apex of coronavirus cases that was being underestimated by at least 27% — providing a current estimate of 140,000 cases in the next 14–21 days, with a current shortage of nearly 83,000 hospital beds and nearly 30,000 ventilator machines.
With each passing day, hard-working Americans are under threat of losing their retirement funds in a massive market nosedive greater than or equal to that of 2008. Meanwhile, some of the nation’s top financial minds are predicting crisis scenarios like 30% unemployment and a 50% drop in GDP by the time Q2 is over. This will not get better until it gets far, far worse. It’s time to consider closing the stock market until we flatten the curve.
Days- and weeks-long closures of the markets are not new or unprecedented; they simply have not happened in a long time. The outbreak of World War I in Europe caused the NYSE to close for four months; since then it has closed only a handful of times, including after 9/11, the assassination of John F. Kennedy, and Hurricane Sandy. But now, more than ever, with millions furloughed, laid off, or under threat of unemployment, millions more working from home, and countless nonessential businesses mandated closed in states hit earliest and hardest, we must consider how it could possibly be rational to allow normal trading in a paradigm that is itself hardly believable. We cannot permit millions of retirement accounts to remain at risk of panic selloff when the owners of those accounts have been barred from being active participants in the economy. It is irresponsible to allow only those with the most disposable income to trade with a lower risk factor, while millions of Americans living near urban transit hubs sit at home in fear, and millions more in rural areas await the same fate. Hedge fun managers going to town on undervalued stock with spare cash do not represent a significant sliver of the nation; yet they are currently being given priority. If precedents exist for both circuit breakers and larger market shutdowns, is this not the perfect time to leverage them?
Maintaining a national charade for the sake of marginally inflating investor confidence is nothing short of sociopathic. When President Trump says “the cure cannot be worse than the disease,” what he means, put simply, is that to him, any prolonged damage to financial markets as a byproduct of the quarantine (“the cure”) should not be allowed to be worse than the yet-untold losses of human life (“the disease”). Trump’s deadline for reevaluation is April 7, less than 15 days from now. But because we lack adequate numbers of test kits, we don’t know how many Americans are infected; because we don’t know how many Americans are infected, we cannot properly model a curve. So where, pray tell, did the arbitrary 15-day deadline come from, against the advice of Trump’s own health experts? He would rather act in a way which prematurely truncates a national quarantine (“WE WILL SEE WHAT HAPPENS,” “our country wasn’t built to be shut down,” “I’m not looking at months, I’ll tell you right now… we’re going to open up our country”) and has the potential to kill millions if it means that the flow of capital can continue as usual. But if done wrong, it will not.
Social distancing will have to practiced to some degree until a vaccine is developed, which could take up to 18 months, by some estimates, so any hard number on when things can just go back to normal is either a) delusional, b) ignorant of the enormous curve yet to be flattened, or c) a ploy to raise consumer confidence one last time for the savviest sellers to jump off before a recession — perhaps all three. This represents a flippant disregard for human life echoed more recently by Texas Lt. Gov. Dan Patrick, who argued on Tucker Carlson’s FOX primetime show that grandparents would be willing to die for their grandchildren in a heroic act of going shopping again if it meant restoring the economy to normal.
Pausing the stock market until the curve is flattened will allow the virus to properly run its course, for public health officials to evaluate and model the virus’s spread, and for the nation — and the world — to adhere to universally recommended public health guidelines without the pressure of helping a select few profit in a time of panic and widespread shutdown. When asked about this particular scenario, Trump unsurprisingly responded, “we don’t want to be doing that” — even though the economic calamity he seems to fear so much would instantly be averted if he decided to take this option. Maybe he, Steve Mnuchin, Wilbur Ross, and Larry Kudlow are content with the status quo — but at least 55% of America might have something else to say.
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