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VOL. 44 | NO. 11 | Friday, March 13, 2020
The mighty bull market falls victim to a tiny virus
NEW YORK (AP) — In the end, the mighty bull was slayed by a tiny virus.
The longest bull market in U.S. history can now be said to have lasted almost 11 years and rewarded investors with a return of 529% based on the performance of the S&P 500, including dividends.
The bull officially ran from March 9, 2009, until Feb. 19, 2020, when it began the 26.7% dive that as of Thursday has taken it into bear market territory.
The record run for stocks appeared fairly smooth but there were some hiccups. The bull survived a downgrade to the U.S. credit rating and the European debt crisis in 2011, two slowdowns in China (2015, 2016) and a market freakout over higher interest rates in late 2018, after investors had been spoiled by ultra-low rates for a decade.
But the coronavirus scare flooded the market with too much uncertainty. Investors hate uncertainty more than anything, as the Wall Street saying goes, and the first reaction for many to it is to sell. And this new virus has certainly been uncertain.
The coronavirus has infected around 128,000 people worldwide and killed over 4,700. The death toll in the U.S. climbed to 39, with over 1,300 infections. For most people, the virus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia. The vast majority of people recover from the virus in a matter of weeks..
Corporate profits are the lifeblood of the stock market, and they are getting hit on two ends. On one side, the virus has snarled supply chains around the world, with factories shut due to workers out on quarantine. That gives companies less things to sell. On the other side, the virus is causing the cancellation of events from professional basketball games to concerts. Two presidential candidates will hold a debate this weekend without a live audience. And worried consumers are staying away from stores, public gathering spaces and flights, wiping away demand.
On Thursday, the S&P 500 fell 260 points, or 9.5%. It was the index's biggest percentage drop since Black Monday in 1987.
The amazing rally for stocks altered the make-up of the market, elevating technology stocks to a dominating position and lessening the weight of industrial and energy companies.
Back in March 2009, the biggest companies were familiar names with long histories in traditional industries like oil (Exxon Mobil) and makers of detergent and other household products (Procter & Gamble).
There is, however, one company that's among the most valuable today that was also among the Big Five back then: Microsoft.
These days, technology companies dominate the top five, as they do the market overall. After Microsoft, there's Apple, Amazon, Google's parent company Alphabet, and Facebook. At the beginning of the bull market, Apple's iPhone was just two years old and Google had just released its Android operating system for smartphones.