• Thomas Parker

Economic turbulence continues as investors flee to safe havens

On Monday, U.S. stocks sunk enough to trigger a trading halt before recovering, while the price of crude oil dropped more than 30% and 10-year Treasury yields plummeted to the lowest level in history.

It was a turbulent day for markets across the globe as well, with some foreign indexes experiencing the worst declines since the 2008 financial crisis. The S&P 500 is now down almost 20% from its all-time highs reached just a month ago. The recent market volatility could result in the end of an 11-year long bull market.

10-year Treasuries slid to their lowest yield in the largest one-day drop since August 2011 and the largest weekly drop since December 2008. The yield on 30-year Treasuries fell to under 1%, the lowest on record after declining the most on record, indicating that market participants may believe a global recession is imminent.

The Federal Reserve, who cut its benchmark interest rate by 0.5% in an emergency move just last week, may be expected to reduce rates even lower when they meet next week.

The U.S. dollar index also continues to slide in March, falling below 95.0 for the first time since 2018.

A selloff in crude oil began late last week after OPEC, a cartel of oil-producing nations, failed to strike a deal regarding potential cuts to oil production. Tensions between two of the nations--Russia and Saudi Arabia--could result in a potential price war and lower oil prices for the foreseeable future.

Over the weekend, Saudi Arabia announced significant price reductions on official prices for April, and the nation says it will increase oil production to above 10 million barrels per day. The price cut followed a breakdown of negotiations in Vienna last week. OPEC had recommended additional production cuts starting in April, but Russia rejected the cuts when the 14 nations met on Friday.

“It is pretty nuts right now,” said Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets, in an email Monday. “It feels like ‘07-’08 when every weekend it felt like the bottom was falling out.”

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