From the March 6th New York Times:
A sudden global disease outbreak isn’t the kind of risk that many market players were trained to react to. Few investors are epidemiologists. The most sophisticated financial models and the fastest-moving trading algorithms are flying blind.
“This you can’t even put a model on, because it’s not really something that we’ve seen before,” said Michael Feroli, the chief U.S. economist at JPMorgan.
In financial circles, there’s a term for such events: a black swan. They are rare but ominous. And they are impossible to anticipate....
What is especially unnerving to investors now is the apparent impotence of institutions that would seem to have the greatest chances of soothing markets.
When the Fed announced an emergency decision on Tuesday to slash benchmark interest rates by half a percentage point, stock markets rallied for about 15 minutes before resuming their downward spiral.
One reason: Investors feared that the Fed — whose monetary policy has been a key to the stock market’s long rally — is running out of options to stimulate the economy....
The reality is that nobody knows quite how to calm markets, much less how to contain the virus outbreak. Modest bits of upbeat news — the Labor Department announced on Friday morning that the American economy had added 273,000 jobs in February — haven’t done the trick....
“There will come a day when we reach a bottom,” said Mr. Marks, the Oaktree co-chairman. “We have no idea when or where that bottom will be. But all great investments begin with discomfort. You make the big money buying things no one else will buy.”
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