📉 COVID-19 crashes the market

Monday, March 16, 2020 by Robinhood Snacks | Disclosures

With markets in crisis mode, we're in this fight together

Last Week’s Market Moves
Dow Jones
23,186 (-10.36%)
S&P 500
2,711 (-8.78%)
7,875 (-8.17%)
$5,552 (-39.25%)
10-Yr US Treasury

Hey Snackers,

Global health pandemic, market crash, economic sick day (sick "month?" season? year?). Policymakers tried to get extra creative last week (and through the weekend) to resuscitate everything:

  • Financial medicine: Interest rates were just cut to zero and emergency loans are ready to go for financial institutions.
  • Economic medicine: Students don't have to worry about loan interest charges, the newly unemployed are set to get enhanced benefits, and struggling small businesses have government loans available.
  • Health medicine: Congress passed a bill to make COVID-19 testing free and big public events are virtually all cancelled. Major cities have started takeout-only rules for restaurants/bars.

Markets rallied big on Friday after a brutal week — the Dow had its best single-day point gain ever, after Wall Street's worst day in 30 years. The S&P 500 has fallen over 16% this year, with more market turmoil likely ahead.

1. Policymakers enter crisis mode on COVID-19 as markets crash

Welp, that escalated quickly… Wall Street prides itself on predicting risks and opportunities quicker than everybody else. Two weeks ago, it predicted doom as markets suffered their worst week since 2008. Then, things got worse:

  1. COVID 19 shut down the world’s economy: It’s officially a global pandemic and a National Emergency in the US. Some European countries have closed businesses except for food, health, and banks.
  2. Oil markets crashed: “Anyone can die in a freak, gasoline accident.” -- Saudi Arabia to Russia. The two oil-rich countries fighting about how much oil to pump triggered the biggest 1-day drop in oil prices since the 1991 Persian Gulf War.

Stocks fly together (downward)… When economies and markets get shaken by something as far-reaching as a pandemic, investors tend to hit the “sell” button as indiscriminately as a “down for anything” Tinder user swipes right.

  • The winners: Some businesses stand to benefit from extended Work From Home and a growing "sanitize-it-all" trend.
  • The losers: Everyone else. Many expect an economic recession has already started (recessions = 6 straight months of economic shrinkage). FYI, the last one in the US ended in June of '09. Shrinking economy ➡️ shrinking profits ➡️ shrinking stock prices.

What goes up, must come down (and vice versa)... Each “bull market” is followed by a “bear market”, and versa vice — it’s like a see-saw with giant duffle bags of money sliding back and forth.

  • Bull markets: Once stocks rise 20% overall from the last low, it’s called a “bull market”, which tends to include economic growth and falling unemployment.
  • Bear markets: Last week stocks fell past the “bear market” threshold, meaning we’d dropped over 20% since February’s record highs. This tends to bring economic shrinkage and rising unemployment.
  • Yo-Yo Mountain: Wealth advisers generally recommend not timing the market's ups/downs because they're hard to predict. Over the past nine decades, stocks overall have risen about 10% per year on average. It's like a long hike up a mountain with a yo-yo going up-and-down, but the mountain's overall slope rises.
  • Pregame hosted over Zoom... Shares of video conferencing company Zoom have soared 63% in 3 months. As meetings turn virtual and WFH goes standard, more companies are Zooming (it earned verb status) — its quarterly sales jumped 78% from the year before. Wednesday was Zoom's biggest download day ever. Now it's offering videoconferencing to K-12 schools for free as classes move online.

  • Groupies wanted... Pepsi splurged almost $4B on energy drink throwback Rockstar, which Pepsi has distributed since '09. Big Bev has been shifting to "functional beverages" — think low-cal energy drinks, hard kombucha, CBD-infused liquid, and anything you drink "for a reason" besides just hydration or the alcohol. So instead of wasting years and $$$ to build up its own brand to rival Rockstar, Pepsi now owns the #3 energy functional bev ASAP.

  • Terrible time to be 'Sassy and Gassy'... Oil prices took their biggest plunge since '91, dropping 24% last Monday. Part of that is coronavirus-reduced travel demand. The rest is reality show-worthy OPEC drama: Saudi Arabia wanted Russia to cut oil production to boost prices of their precious export. But Russia refused (reportedly, to hurt US oil producers). So Saudi jacked up its production, dropping oil prices even further. Since then, Exxon Mobil stock is down 21% and Occidental Petroleum fell 53%.
  • Despite your current WFH lifestyle... work messaging service Slack isn't doing as well as its "stay-at-home" peers (like Zoom). Shares dropped 20% after Slack's earnings revealed it's growing slower than investors expected. The problem is that it simply takes way longer to implement Slack than Zoom (think salespeople, contracts, IT integrations, and learning curves teaching Bruce what "channels" are). So Slack's experiencing some "opportunity blockage" — like the Baby Yoda toy situation.
What else we’re Snackin’
  • Visualize: The history of pandemics, visualized in a 1 infographic — see how coronavirus compares to the others so far
  • Forget: The top 10 items most left behind in Ubers, according to Uber — #3 is "BMW keys" (#2 is $100 bills)
  • Lead: How to lead during times of crisis and uncertainty (like Mom always said, it comes back to communication)
  • Stay: How to not go stir-crazy while self-isolating (push-ups are key — you can also write a classic novel)
  • Shop: A "pandemic planner" thinks coronavirus stockpilers shouldn't waste their money on these 4 items
Snacks Daily Podcast

Direct-to-patient "half-icorn" Ro is trying to become the Casper of erectile dysfunction meds. Its new strategy: launch pharmacies so it can vertically integrate your healthcare experience with 500 prescriptions.

We’re looking at Ro's new pharmacy play and giving you more perspective on how this market crash compares to previous ones on our 15-minute pod.

Tune into Snacks Daily on Apple or Spotify.

This Week

Disclosure: Authors of this Snacks own shares of Slack

ID: 1120137

Subscribe to Robinhood Snacks

Our Editorial Principles
Robinhood Financial LLC and Robinhood Crypto, LLC are wholly-owned subsidiaries of Robinhood Markets, Inc. Equities and options are offered to self-directed customers by Robinhood Financial. Robinhood Financial is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org. Cryptocurrency trading is offered through an account with Robinhood Crypto. Robinhood Crypto is not a member of FINRA or SIPC. Cryptocurrencies are not stocks and your cryptocurrency investments are not protected by either FDIC or SIPC insurance.

Getting “early access” to options or Web is defined as signing up with a valid email address for a spot in Robinhood Financial’s respective waitlist queues for Web or for options. Getting “early access” to Robinhood Crypto is defined as signing up with a valid email address for a spot in Robinhood Crypto’s waitlist queue. Early access to the waitlist for Web, options, or Robinhood Crypto should in no way be construed as confirmation that a brokerage account with Robinhood Financial has been opened or will even be approved for opening. Priority may be given to Robinhood Gold subscribers and existing customers of Robinhood Financial.

Free trading of stocks and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities via mobile devices or Web. Relevant SEC & FINRA fees may apply. Please see the Fee Schedule.

Robinhood Financial is currently registered in the following jurisdictions. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Robinhood Financial is not registered. Additional information about your broker can be found by clicking here.

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation. For more information please see Robinhood Financial’s Margin Disclosure Statement, Margin Agreement and FINRA Investor Information. These disclosures contain information on Robinhood Financial’s lending policies, interest charges, and the risks associated with margin accounts.

Investors should consider the investment objectives and unique risk profile of Exchange Traded Funds (ETFs) carefully before investing. ETFs are subject to risks similar to those of other diversified portfolios. Leveraged and Inverse ETFs may not be suitable for all investors and may increase exposure to volatility through the use of leverage, short sales of securities, derivatives and other complex investment strategies.

Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. A prospectus contains this and other information about the ETF and should be read carefully before investing. Customers should obtain prospectuses from issuers and/or their third party agents who distribute and make prospectuses available for review. ETFs are required to distribute portfolio gains to shareholders at year end. These gains may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading will also generate tax consequences. Additional regulatory guidance on Exchange Traded Products can be found by clicking here.

Options transactions may involve a high degree of risk. Please review the options disclosure document entitled the Characteristics and Risks of Standardized Options available through https://about.robinhood.com/legal or https://www.theocc.com to learn more about the risks associated with options trading.

The cash management program is expected to be offered by Robinhood Financial LLC. The cash management program, when operational, will be an added program to Robinhood brokerage accounts and will not be a separate account or a bank account. Robinhood Financial will provide additional information on the cash management program once it is operational to help customers, including those with “early access,” to determine if they want to add the program to their brokerage account.

Robinhood Snacks newsletters and podcasts reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are meant for informational purposes only, are not intended to serve as a recommendation to buy or sell any security in a self-directed Robinhood account or any other account, and are not an offer or sale of a security. They are also not research reports and are not intended to serve as the basis for any investment decision. Any third-party information provided therein does not reflect the views of Robinhood Markets, Inc., Robinhood Financial LLC, or any of their subsidiaries or affiliates. All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and customers may lose money, including their original investment. Robinhood Financial LLC, member FINRA/SIPC.

Testimonials may not be representative of the experience of other customers and are not guarantees of future performance or success. Robinhood Financial LLC, member FINRA/SIPC.

Third party information provided for product features, communications, and communications emanating from social media communities, market prices, data and other information available through Robinhood Markets, Inc., Robinhood Financial LLC or Robinhood Crypto, LLC are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any financial instrument or cryptocurrency or as an official confirmation of any transaction. The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Any information about Robinhood Crypto on any Robinhood website (including www.robinhood.com and blog.robinhood.com), the Robinhood platform, e-mails, or any other communications, are meant for informational purposes only and are not intended as an offer, solicitation, or advertisement for Robinhood Crypto or any goods or services offered by Robinhood Crypto. The Robinhood website provides its users links to social media sites and email. The linked social media and email messages are pre-populated. However, these messages can be deleted or edited by users, who are under no obligation to send any pre-populated messages. Any comments or statements made herein do not reflect the views of Robinhood Markets Inc., Robinhood Financial LLC, Robinhood Crypto, LLC, or any of their subsidiaries or affiliates.

Investors should be aware that system response, execution price, speed, liquidity, market data, and account access times are affected by many factors, including market volatility, size and type of order, market conditions, system performance, and other factors.

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk it does not assure a profit, or protect against loss, in a down market. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. Trading in cryptocurrencies comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Cryptocurrency trading requires knowledge of cryptocurrency markets. In attempting to profit through cryptocurrency trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial cryptocurrency trading. Cryptocurrency trading may not generally be appropriate, particularly with funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. Cryptocurrency trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular cryptocurrency suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying cryptocurrency system. Several federal agencies have also published advisory documents surrounding the risks of virtual currency. For more information see, the CFPB’s Consumer Advisory, the CFTC’s Customer Advisory, the SEC’s Investor Alert, and FINRA’s Investor Alert.

Robinhood Crypto, LLC has a seller of payment instruments license in Georgia, with reference number 61417.

Robinhood Crypto, LLC has a money transmitter license in New Jersey, with reference number 1803456-C22.

Please note that an Alaska money transmission license does not cover the transmission of virtual currency.

Check the background of Robinhood Financial LLC and Robinhood Securities, LLC on FINRA’s BrokerCheck.

Robinhood Terms & Conditions    Disclosure Library    Contact Us    FAQ

© 2020 Robinhood. All rights reserved.