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  • Published April 06, 2020 12:00AM UTC
  • Publisher Wholesale Investor
  • Categories Insights

Financial historians will look back on March 2020 for decades to come. It saw staggering levels of volatility, with many nations placing their entire economies into shutdown, and saw unprecedented financial stimuli and support on a global scale, in an effort to stem the bleeding. March also brought most of the damage which resulted in the S&P logging its worst quarterly performance in its history. Although COVID-19 had been on trader’s radars as far back as January, the markets, somewhat curiously, failed to react till well into February. Perhaps a naïve thought the outbreak would be largely contained in China, or the distraction of US reporting season (and the crypto-like gains and losses from stocks such as Tesla (TSLA) and Virgin Galactic (SPCE)) meant the markets largely ignored the looming globalisation of the virus. That all changed mid-February, and while most market crashes are satisfied with just one ‘Black’ day, March provided us with three:

Black Monday – 9th March

The first ‘Black’ day of the month saw the Dow sink 2,000 points in it’s worst day in over a decade, while the broader S&P lost over 7%. The tech-heavy Nasdaq was not spared, shedding 8% and our local benchmark followed the US lead by dropping 7.3% – the biggest ASX 200 drop since 2008. Played out against the less than ideal backdrop of the Russia v Saudi Arabia oil war, this day signified the official entry into bear market territory (>20% drop from the peak).

Black Thursday – March 12th

After modest recovery through the midweek sessions, some traders began to look for bargains which may have presented as a result of the rout, only to be caught out once again on ‘Black Thursday’. All US benchmarks suffered their single biggest one day fall since 1987. The UK market lost over 11% the same day and even Bitcoin – the self-styled safe-haven asset of the future – was shown to be just as vulnerable, dropping 40% in a single session. As the old adage goes “never try and catch a falling knife”

Locally however, the action turned from the US and Europe to the Asia-Pacific region, and we saw one of the most stunning turnarounds in ASX history, with the benchmark index recovering from an 8% drop on opening (not unexpected given the events in the US overnight) to finish the session up 4.4% – a previously unheard of 13.7% bottom to top recovery. Not quite the Friday the 13th that local investors had feared as they awoke.

Black Monday II – March 16th

Coming just a week after the first Black Monday of 2020, any optimism in the local markets we may have enjoyed over the weekend was quickly extinguished, as traders awoke on Monday morning to see US futures markets a sea of red. Not for the first time, we heard of circuit breakers being activated or of markets being ‘limit down’, ceasing trading temporarily in an effort to restore order in the market. In the case of the S&P, this limit is reached at a 5% drop, from which it can either recover, or remain in suspension until the market opens. With these limits indicating that a 5% drop would be the minimum damage about to be wrought on the US indices, the ASX 200 acted accordingly; shedding just shy of 10% in a day – a record one day fall. Predictably enough, the main three US benchmark indices lost far more than their 5% limits once the exchanges had opened – the S&P 500, Dow Jones and Nasdaq all losing close to 13%.

After the final bell on the last trading day in March, the ASX 200 traded at a 20% loss on the month, down 24% on the quarter, or $450 billion in real terms. It would take a brave trader to try and predict what April has in store… or when we’ll summon up the collective courage required to check our super balances once again.

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