It was a perfect storm that hit Wall Street at the end of Sunday, when it was clear that there would be a strong possibility of an oil price war, after Russia did not accept the agreement with OPEC to reduce production, and Saudi Arabia responded with the intention of increasing production, creating an open war with one of the main energy producers in the world. In addition, the news that came out of Italy, concerning the coronavirus, namely the quarantine of about 16 million inhabitants, exacerbated the fears that the economic effects and the spread of the virus may be in a phase of great danger.
The result of sum of these facts were falls in the futures of the S&P500 in the order of 5%, a value that worsened today at the opening when the indices reached losses in the order of 7%, which forced the suspension of trading. At the reopening Wall Street followed with a 5% slide, accompanied by a sharp 20% devaluation in the price of crude oil. What will be the short-term future of the energy sector is the question of the day, in relation to the rest of the sectors, there are significant declines, even those of refuge such as retailers of essential products, which, however, are the least affected by sales by yielding 2%, half of energy sources are the worst sector. At this stage, there is already an additional fear, the question of the market being able to enter Bear Market in a very short time, I would say even in record time after this happened with the transition to the level of correction. Entering the bears’ territory means a 20% drop, but it also anticipates a strong probability, around 50%, of an economic contraction in the short and medium term.
