Please click on graph above to enlarge
Source (with a more interactive graph): STOXX® Europe 600 Banks
This is a chart of the STOXX Europe 600 Banks index from January 1987 to March 2020. Curiously, in the last few days, we've seen this index hit levels it last reached in the 1987 to 1988 time period.
As European bank stocks were falling, Neil Irwin wrote an article for The NY Times on March 12, 2020 titled Something Weird Is Happening on Wall Street, and Not Just the Stock Sell-Off. He wrote in his piece:
"Underneath the headline numbers were a series of movements that don’t really make sense when lined up against one another. They amount to signs — not definitive, but worrying — that something is breaking down in the workings of the financial system, even if it’s not totally clear what that is just yet."If you enjoy learning about markets, please read his entire article and continue to pay attention to the STOXX Europe 600 Banks index. Karin Strohecker at Reuters also reported on March 12, 2020 Debt insurance costs of European banks spike on selling flurry. Maybe these two items aren't related. Maybe the market was simply disappointed by comments from the European Central Bank on Thursday, which many investors viewed negatively. One way or another we will soon learn the initial impact the COVID-19 response and the Saudi Oil Price War are having on the financial sector.
Bill McBride, a full time blogger at Calculated Risk, posted The Sudden Economic Stop on Friday, March 13, 2020. In his post he wrote,"This is a sudden stop for the US economy like nothing I've ever seen." The ripple effects of this sudden economic stop in terms of timing and duration remain extremely unpredictable. Additionally, this week investors saw a sudden rise in volatility of multiple asset classes.
Let's end with this quote from Jason Furman who was a top economic adviser to President Barack Obama and is now a professor at Harvard’s Kennedy School of Government:
"At this point, this feels much worse than 2008. Lehman Brothers was quite bad, but it was the culmination of a sequence of things that had happened over 14 months. This hit all at once. There were a lot of people lucky and privileged enough that they didn’t reduce their spending in 2008. But everyone is doing it now."You can read his interview with Ezra Klein on VOX (h/t Jesse Felder).
As always, wise investing my friends.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.
