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Markets On Pace For Worst Week Since 2008 Crisis Due To Coronavirus Panic

Topline:  All three stock indexes fell by over 10% from previous record highs as of Thursday morning, indicating markets have plunged into correction territory amid the ongoing panic over coronavirus⁠—and are now on pace for their worst week since the 2008 financial crisis.

  • The Dow Jones, S&P 500 and Nasdaq plummeted after Thursday’s opening bell, with the Dow remaining down by over 500 points, a 2% loss, as of midmorning.
  • The S&P and Nasdaq also posted 2% losses Thursday morning, meaning this week was the markets’ worst since the 2008 crisis that sparked the Great Recession.
  • The Dow continued to plummet Thursday morning, losing almost 780 points before paring back losses to the mid-300s by early afternoon.
  • The sell-off illustrates investor fears are increasing, despite President Trump’s reassurances around the coronavirus yesterday, saying, “The risk to the American people remains very low,” and “we’ve done a great job in keeping it down to a minimum.”
  • Also on Thursday morning: Goldman Sachs predicted no earnings growth for U.S. companies as a result of the coronavirus, but some forecasters still predict 7% growth.
  • Investors are worried about future returns, according to a Vanguard survey today in which respondents said they expect market returns over the next 12 months and the next ten years to be lower than the annualized returns of the last three decades.

Crucial quote: “In the most recent survey, the average expected one-year stock market returns were roughly 5%, and the expected ten-year returns were approximately 6%, both of which are lower than the annualized return of the past 30 years,” according to Vanguard. The survey was completed in mid-2019, well before coronavirus took hold, and Vanguard notes, “While these expectations are rather muted, they remained consistent across surveys beginning in 2017 and are marginally more optimistic than the central tendency of Vanguard’s expected return outlook, which ranges from 3% to 5%.” 

Key background: The Centers for Disease Control on Wednesday confirmed the first case of community transmission of the coronavirus in Sacramento, California, which means the patient had not traveled to any affected areas or come into contact with anyone who had the virus. European markets are also sliding due to coronavirus fears, with the Stoxx 600 sliding over 2%, continuing its Wednesday sell-off. Stateside, there are currently 60 confirmed cases of coronavirus in America (42 are evacuees from the Diamond Princess cruise ship in Japan), and U.S. health officials say they expect to see more cases. Globally, more than 81,000 people have been infected with the virus as of Thursday, and more than 2,700 have died, mostly in China. The CDC still says that the risk of exposure for the general American public is low, but says it’s working to prepare state and local officials in the event the threat level rises.

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