As of this writing (February 28, 2020), the Dow and S&P 500 are down more than 15 percent from recent highs. Given that we’ve had one of the worst weeks in history for the stock market, many fear that we’re on the road to another financial crisis. But what can investors do to protect themselves? To answer this question, we first need to assess what is really happening—and what isn’t.
Market Continues to Slide on Coronavirus Fears:
What Should Investors Do?
What Does the Coronavirus Mean for Investors?
Despite attempts by Chinese authorities to contain the coronavirus, the numbers make clear that the virus is now spreading around the world. According to the World Health Organization, there are 79,331 confirmed cases, of which 77,262 are in China and 2,069 are outside of China (as of February 24, 2020). Unfortunately, the numbers only seem to be growing, with the Washington Post recently reporting that there were 833 confirmed cases in South Korea and 53 confirmed cases in the U.S.
When interest rates in the overnight lending market (known as the repo market) spiked in September, there was a real fear that it was a sign of something far worse. This was made more confusing by the complexities of the market itself. The good news is that while what happened in the repo market may sound alarming, there’s no need to worry. Let’s look at what happened, where we are now, and what to watch out for.
The Repo Market: Cause for Concern?