Financial Markets and Coronavirus
Oh, what a quarter! We are in the midst of what can truly be called a rare event. The coronavirus outbreak has hit us from all directions. Rightfully, the primary focus of the outbreak has been the health-related implications. However, implications for the economy and financial markets have also been front and center. It is these implications that are the focus of this month’s newsletter.
We have clearly entered a period of increased market volatility. The large day to day fluctuations of the value of the stock market are evidence of this observation. For example, the Dow Jones Industrial Average fell by almost 13 percent on March 16 and increased by over 11 percent on March 24. Figure 1 plots the daily returns in percent of the Dow Jones Industrial Average from April 1, 2019 through April 1, 2020. Notice that the recent returns in the month of March are very volatile. The returns are large in magnitude and move in both directions.