The stock market has been on an absolutely unique set of wild swings over the past two weeks. For everybody invested in stock markets, which is basically half the world now, and everybody affected by stock markets, which is basically almost everybody else, it’s been a crazy time.
Several extremely important questions arise, but let’s start with the jokes. In times like these, the jokes must be at least part of the thing, surely, because the reality is so dark, one hesitates to go there.
Let’s start with my podcast mate Mark Barnes, who pointed out that there is a reason why the word “tariffs” ends with the letters FFS.
New York University Stern School of Business professor and well-known podcaster Scott Galloway said in his newsletter on Friday, “What happened this past week was unlike anything I’ve ever seen. It was GameStop, but for the entire market. We saw $1.5-trillion added to the Magnificent Seven in one session. And the next day, a thousand-point drop. That is not a market. That is not investing. That is just chaos.”
Saturday Night Live (SNL) parodied President Donald Trump’s tariff policies in a sketch where (Trump) likened himself to Jesus, stating, “The stock market did a Jesus — it died, then on the third day it was risen”. Late-night talk show host Jimmy Kimmel mocked the erratic nature of the tariffs, quipping, “It was another ‘tarriffying’ day on Wall Street. The Dow was down, the S&P was down. Cocaine was up.”
Well, one can laugh, sort of. But there is no gainsaying the seriousness of the situation. The co-host of Galloway’s newsletter, Ed Elson, an analyst and writer, makes the point that what is at risk is the credit-worthiness of the US. “What are the implications of our stock market becoming a meme stock? Meme stocks all have junk ratings. And now we are putting the entire economy in that position.”
Wall Street’s ‘fear gauge’
Personally, I don’t think people realise how close the world came to a full-blown economic crisis – and how it’s still a possibility. The reason we know this is because of the Chicago Board Options Exchange’s Volatility Index (VIX), often dubbed Wall Street’s “fear gauge”.
The VIX measures the market’s expectations for volatility over the next 30 days, based on S&P 500 index options. A higher VIX indicates anticipated market turbulence, while a lower VIX suggests relative calm; the long-term average is around 19.
Well, the VIX reached 65 last Wednesday, retreating to 32, still indicating high market volatility and increased investor fear. The previous highs were in 2020 amid the Covid-19 pandemic, when the VIX closed at 82.69 on 16 March. The highest level it reached was in October 2008, during the Global Financial Crisis, when the VIX hit an intraday high of 89.53, its highest level on record.
But these highs were reached because of an international calamity and problems in the banking system that had built up over decades. This one was caused by the decision of a US president, which could be implemented at any point.
Just to return to the jokes for a moment. One suggestion on a market notice board was, “Buy the tariff, sell the reversal, rinse, repeat — day trading is now just parenting the President.”
The really big problem, as Galloway and many others have pointed out, is that both US Treasury bonds and the dollar fell sharply during the crisis. “That’s not normal. Typically, both rally as global investors seek safety.
“Since last Tuesday, the dollar index is down 3.4%. Since mid-January, it’s fallen 9.2% — extraordinary by currency standards.
“The 10-year Treasury yield jumped from under 4% last week to over 4.57%. Beneath the rate swings was something deeper: a global loss of confidence in the United States.”
It’s at times like these that we all seek a safe haven. Thank heavens for Bitcoin!
Now I’m the one joking. Bitcoin is 20% down this year. The safe haven turns out to be the ancient one: gold. Gold is now at an absurd level, more than $3,200 an ounce, supercharged by its safe haven status and the dollar’s decline.
And the other thing: recession fears. And that, I’m afraid, is not a joke. DM
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