By Giles Coghlan, Chief Currency Analyst at HYCM
Problems mount for financial markets
The Volatility Index had its highest recorded close yesterday as it surpassed the highs from the 2008/9 financial crisis. The situation that is overwhelming the market is that too many different sectors are going to be impacted by the coronavirus at the same time. The mantra , 'too big to fail' from 2008 has become 'too many to fail'.
VIX close surpasses high closes from 2008/2009
The VIX indicates that there is still yet more stock pain ahead. Even though the S&P500 fell nearly 12% yesterday lower prices look ahead. A multiyear trend line has now broken this week and price is moving towards the S&P500 lows as President Trump took office.
COVID19 Spread Unrelenting
New Fiscal stimulus measures announced daily, central banks falling over themselves to cut interest rates, social distancing polices expanding on the hour and yet the markets tumble. The issue here is that this is a medical problem that needs a medical solution. As cases continually mount, along with the death toll, then fears will paralyse citizens as business can't be 'as normal'. The VIX is showing what the coronavirus case table is indicating: A growing problem.