by Sean Kelly
The spread of the coronavirus has sparked some extreme consumer behavior. Americans are flocking to stores and inundating online sites to purchase disinfectants, hand soap, bottled water, canned goods, powdered milk, and toilet paper. The panicked buying has produced empty supermarket shelves and “Sold Out” notifications across ecommerce sites that sell foodstuffs, cleaning supplies, daily provisions or anything that has now been deemed “survival essential” and hence, subject to stockpiling and hoarding.
CNN Business is reporting that sales of hand sanitizers increased 73% in February, thermometers jumped 47%, and surgical masks soared 319% compared to last year.
And then there’s good old fashion bleach. There’s nothing fancy about the white jug solution of sodium hypochlorite that dates back to the 17th century. Its claim to fame has always been found in America’s laundry rooms removing stains and whitening “whites.” But bleach also functions as a strong disinfectant that can kill bacteria, fungus, and yes viruses. Needless to say, shares of Clorox have been rising right alongside Purell and Lysol.
The stockpiling phenomenon has spread across the globe as emergency hoarding is also occurring in China, Japan, South Korea, Italy, the U.K. France, and Canada. And as the citizens of the world rush to fill their “pandemic pantries,” they’re exhibiting behavior that is rooted in fear which almost always leads to panic. The same panic that has now consumed the financial markets.
On Monday, the Dow plunged more than 2,000 points on coronavirus fears and the breakdown of talks between OPEC and Russia which crushed crude prices by almost a third. The sell-off began at the opening bell and the five-minute frenzy that ensued tripped Wall Street’s circuit breakers bringing everything to a screeching halt. The reprieve was short-lived, however. After traders caught their breath, the early jitters quickly morphed into full-blown market hysteria. Stocks cratered throughout the day and logged the worst one-day drop on record.
The “fear” of missing out that fueled Wall Street for over a decade has now succumbed to the “panic” of staying in. And all of this comes at a particularly bad time for overvalued equity markets, overextended consumers, an overleveraged corporate sector, and a Fed that is far less prepared than it should be.
Panic has precedent, and it rarely ends well. In September of 2007, CNN Money published a piece called, “Panic on Wall Street: A Brief History of Fear,” where it discussed how market anxiety was fanning uncertainty. An article in The New York Times published on May 25, 2008 entitled, “Wall Street Exodus: Fear, Panic and Anger,” summed up the anxious psychology of the unfolding market rout. And in 2010, a Forbes piece called, “Fat Fingers Cause Panics,” outlined how nerves and skepticism were prompting investors to sell.
Wall Street’s fingers were downright portly yesterday – and we’re miles beyond any notion of uncertainty, anxious psychology, or early signs of trouble. We’ve stopped traveling, excursioning, and vacationing. Events have been canceled and conferences postponed. Factories have been shut and workers sent home. Stadiums are empty and restaurants are quiet. Virtually every industry that relies on a gathering of customers or a collection of people is now feeling the impact of the quarantines, travel restrictions, business disruptions, battered nerves and economic fallout of COVID-19.
“Amazingly, the market is finally waking up to the prospects of not just viral contagion,” said Scott Minerd of Guggenheim Partners, “but also to financial contagion.” With many analysts now declaring that a global recession is virtually inevitable, it’s time to think beyond all those consumables stacked in our “pantries” to the hard assets stashed in our retirement accounts. Gold rises when everything else falls and with “business as usual” now a distant memory – it’s a critical time to hoard something that holds its value in times of extreme fear and financial uncertainty.