Punch-Drunk Traders Focus Simply on ‘Survival, Not Returns’

Whatever happens in Friday trading, however this week and month closes out, two things are certain in global markets: The scale of February’s moves have few precedents, and everyone involved is going to have stories to tell.

The S&P 500 Index is heading for a seventh day of declines, which would be the longest losing streak since 2016. Some$6 trillion has been wiped off global stocks in this sell-off, while already expensive government bonds have seen so much demand that record-low yields seem to be printed daily.

“It’s more about survival than return on capital today,” said John Moore, the head of trading at Berkeley Capital Wealth Management. “It was a sleepless night last night, and we may get another one tonight, but it’s the weekend soon so fingers crossed things settle.”

This sell-off comes with added edge: velocity. In a swoon that summed up the week, the Dow Jones Industrial Average at one pointplunged 500 points in 45 minutes on Thursday. The correction in the S&P 500 Index was thefastest ever.

On trading floors and research desks the world over, market players are still catching their breath — and bracing for whatever comes next.

Moore says they’re not trying to trade the market because where it’s going is anyone’s guess. He and his colleagues are busy updating clients, keeping accounts well-funded and generally “riding the storm,” he said.

27 Hours

Unsurprisingly, lack of sleep has been something of a common theme. At Futures First, research analyst Rishi Mishra said some work mates had spent up to 27 hours at their desks. For the younger cohort, it’s a once-in-a-career event.

“Many of us who weren’t trading during the 2008 crisis see this as one of those days you could tell your grandchildren about,” Mishra said. “It’s been mental, and that’s probably an understatement.”

In fact ominously, in the markets themselves, comparisons with 2008 and the global financial crisis are building. The S&P 500 was down 2.4% as of 9:46 a.m. in New York on Friday, comfortably on track for its worst week since early October 2008. That came amid the turmoil following the collapse of Lehman Brothers. European shares are on courseto do the same.

“If you think of the banking crisis, where credit was restrained, this is as bad in which demand just drops off a cliff,” said Mark Nash, head of fixed income at Merian Global Investors. “Pandemics are up there with banking and political crisis.”

Expectations that the market turmoil or economic impact of the coronavirus will force the Federal Reserve to cut interest rates are surging — in what could even be thefirst emergency cut since 2008.

‘Big Toll’

Of course, in many corners of the market traders have been lamenting a lack of volatility for years. For them, this may be the opportunity they’ve been dreaming about. But for everyone else the shift in sentiment — less than three weeks ago global stocks were at the highest on record — has been brutal.

“This week is taking a big toll on all of us physically and mentally, it’s like living in a continued hangover,” said Ricardo Gil, head of asset allocation at Trea Asset Management in Madrid. “There’s lots of phone calls, lots of meetings and always with the feeling that you are behind the curve as, even if it was clear that markets were going to fall, the speed of the moves are so sharp. Everything is very overreacted and there’s too much fear.”

Gil isn’t alone in thinking the current displays of market panic might be overdone. Bank of America Corp. strategists led by Michael Hartnett said in a note dated Thursday that their models show that U.S. and European equities are “extremely oversold” and that the S&P 500 between 2,800 and 3,040 is a good point to start buying again. The gauge was at 2,907.80 on Friday.

As Gil and his colleagues look for opportunities on expectations of a March rebound, only time will tell if any such optimism is justified. Until then, traders, investors and analysts will remain caught in the maelstrom.

“As you can imagine, it’s a bit tense,” said Zoeb Sachee, head of European government bond trading at Citigroup Inc.

— With assistance by Sam Potter, Macarena Munoz Montijano, Kit Rees, Priscila Azevedo Rocha, William Shaw, Ksenia Galouchko, Anchalee Worrachate, Abhishek Vishnoi, and John Ainger

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