Bloomberg Opinion: This is Looking More Like a Financial Crisis

A recent article in Bloomberg argues that the current situation resembles the start of a financial crisis: “Businesses and banks are scrambling for cash, and investors are dumping their winners to cover their losses. It all has that very fall-of-2008 feel.”

The article offers the following insights:

• Junk bonds had held appeal for yield-hungry investors who thought that a “reckoning would be far away. Well, the reckoning has arrived all at once, and suddenly everybody wants to be socially distanced from junk bonds.”
• According to Mohamed El-Erian, the Fed is finally taking steps to help limit the economic damage, although these won’t stop a recession.
• “The fate of the economy still depends mainly on getting people moving again, into restaurants, offices and airplanes. That won’t happen until we have better control of the coronavirus.”
• The European response to the virus has been weak, the article argues, noting how rich states have “all but abandoned Italy in its time of need.” Coming on the heels of Brexit, it adds, “this raises doubts about the European Union’s continuing relevance. If its bonds are too weak to help in this crisis, then they may not be long for this earth.”
• Columnist Nir Kaissar contends that stocks may have much farther to fall:
• Retailers will need support from lenders and landlords “to survive the wave that’s swamping them now.”