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The financial markets are sick.
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The coronavirus that originated in China
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is now dominating every asset class in the world.
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So how bad is it?
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Well, I can't sugarcoat this one for you.
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It's serious.
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This has been the worst week for global stocks
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since the financial crisis of 2008.
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The S&P 500, the main US benchmark of stocks,
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has fallen by 10 per cent in just a few days
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to mark its fastest correction since the Great Depression.
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In Europe and the UK, if anything, it's even worse.
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This was definitely not on investors' radars
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at the start of this year.
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Broadly speaking, investors figured that 2020
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was going to be, well, meh.
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Nothing spectacular, but nothing awful either.
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Trade tensions between the US and China had simmered down.
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Global growth looked OK, all pretty humdrum.
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In early January, the virus started
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getting more coverage and attention,
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but again, the thinking was that it would
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be contained within China.
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And looking back at previous epidemics like Sars,
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any damage to markets would likely prove fleeting.
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Factory shutdowns were expected to be brief.
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Investors were talking about how to profit
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from a speedy bounceback.
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The turning point came when the virus hit Italy.
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10 towns were quarantined.
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Big events were cancelled.
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Manufacturing was disrupted.
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The illness started hitting ski resorts.
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And suddenly, for money managers in London and New York,
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this all felt closer to home.
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The market started tumbling in earnest.
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The White House was clear.
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Buy the dip, officials said.
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Investors are not listening.
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Money managers are not reacting to the human cost
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of this outbreak, dreadful though it is.
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Instead, this is about companies' supply chains,
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about factories being unable to operate, about bankruptcies,
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about planes not flying.
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Maybe this is no more serious an illness than the seasonal flu.
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Maybe.
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But seasonal flu does not ground aircraft.
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This is a big risk to growth.
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Europe's leisure and travel stocks
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are putting in their worst performance since 9/11.
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The fear is evident not just in the stock markets.
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The bond markets are on fire.
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Government bonds are always in high demand
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when the going gets tough.
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And right now, US bonds are at a record high with 10-year yields
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well under 1.2 per cent.
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It's hard to overstate how extreme that is.
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The really scary bit for investors - how do we fix this?
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The usual medicine to market wobbles,
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interest rate cuts from central banks,
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is unlikely to do the trick, although investors
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are anticipating them.
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It all goes to show how brutal a shakeout can be when it pierces
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through the anaesthetic of a decade of central bank support.
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Fear is the new greed.
