Wall St economist: There’s a lot of fear in the market

“If we go into recession history speaks for itself. No sitting president has ever been reelected in a recession.”

Wall street (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Wall street
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
US equities plunged on Monday as trading resumed following a slump in oil prices.
Trading on US stock exchanges was halted immediately after opening as the S&P 500 fell 7%, triggering an automatic 15 minute cutout put in place after the 2008-9 financial crisis.
Benchmark ten-year yields fell to a record low of 0.318% and were last at 0.487%. The dollar index against a basket of currencies was down 0.4 percent.
PETER CARDILLO, CHIEF MARKET ECONOMIST AT SPARTAN CAPITAL SECURITIES IN NEW YORK:
“This is basically panic selling created by the sharp drop in oil prices. There’s a lot of fear in the market and if the price of oil continues to move lower it’s an indication that a global recession is not far away. We see that with gold, Treasury yields collapsing and the dollar as well. We’re not that far from entering into bear market territory another sign of economic decay.”
“We’re in panic mode and I expect the Fed will come to a rescue. I would imagine that the Fed’s tools are someone limited and they may have to resort to a new round of quantitative easing. This could cause some real disorders in the credit markets, and with the Dow moving into bear market territory, we could see levels in the indices going even lower. There’s a good possibility the Dow could drop under 20,000 and the S&P drop down to 2,500 before we see a turnaround. Not today but it could happen this week.”
“If we go into recession history speaks for itself. No sitting president has ever been reelected in a recession.”
“The weakness in China and Europe has pressed on demand and along came the coronavirus. Now we’re at levels that suggest that things could get worse and we could be in for a recession. You can’t have a good economy if oil prices collapse.”
JIM VOGEL, INTEREST RATE STRATEGIST, FHN FINANCIAL in MEMPHIS TN:
"Until this weekend there were a lot of people holding onto core positions on the idea they could ride this out. That’s being re-evaluated.
"Friday, we all went home thinking about what we were dealing with, we have to watch Italy and other things, but nobody thought that Saudi Arabia would start a price war. Suddenly you have to re-evaluate what else could impact this.
"The more these events affect more people, the more it’s going to leave lasting impressions that can easily extend through the presidential race. I don’t know if it’s good or bad (for US President Donald Trump’s re-election efforts.) In an event like this typically the administration has the upper hand until it attracts so much negative attention. A national crisis is a positive for an incumbent as long as things don’t get out of hand.
"Most of our clients are financial institutions. We expect loan demand to temporarily flag. We’re expecting our investment base to continue to see a great amount of cash inflow without realistic opportunities to put that money to work once that cash comes in. With the Fed likely to cut interest rates again it’s very hard to sit on the sidelines."