The sectors where you might want to hide out, each down by at least 4. 5 . Volumes down as well. Industrials, 106 above the industrial average in canada. Canadian stocks fell 10 on the day as the country recorded its first death from the coronavirus. Romaine european stocks flirting with the bear market. Of course, we had that big drop in crude. We know what sovereign bond yields are doing with the treasury yield. Scarlet everyone is looking for different technical levels, searching for any kind of hint. That is what Abigail Doolittle does so well. Abigail i want to start out with what stood out to me most. Capitulation, even though we are probably not close to a capitulation bottom. The dow transports in a bear market. Oil clearly in a bear market. The s p 500 down almost 19 . Hard to see the s p 500 not slip into a bear market. What the impact will be to the global economy. This is the chart that really, on this day, stands out the most the dow transports today did something it really has not since 2008. Back in 2002, you can see the dow transports went below the 100 month moving average. That means it went down to the 200 month moving average in yellow. In 2011, we did see a little bit of meandering below the moving average. Today, the dow transports below the 100 month moving average. Clearly confirms the transports to go to another 20 , 5 down from here. It is hard to see the s p 500 inding up finally, bringing oil once again. The dollaryen in white. They, this huge rally for yen. Some of the money coming out of these risk assets clearly going into the haven assets. Bestthe last 12 days, the 12 days since 2008. That is the kind of pilot into the haven assets that we are seeing. To abigailr thanks doolittle. Joining us around the desk, Sarah Ponczek and sherry paul. A very lofty title. You bring a lot of authority. Share some of that authority with us. Asot of people look at this a oneday sort of event. It is easy to sort of get scared. Are there areas of this market that are still healthy and resilient, even if we do see some of the worse her Case Scenarios for coronavirus. Thank you for that question. Two things. Number one, i think what is to 2008, inis time 2008, we had a failure, then a demand shock. Here, we have a demand shock and we may end up having some failures. We sort of have a reversal of the causality, which i think is really key. I think that speaks to the crocks of your point, which is, what happens from here, does demand backup . If that is the case, where are the bargains today . We go back to the things that are not as down today. Financials are getting crushed, oil stocks are getting crushed. We want to go back to those defensive areas. Waven forget, the second china discussions out there in the wind. Consumer discretionary stocks, highquality companies that pay dividends, that can be dynamic with their cash flow. We know they will deploy that cash to the benefit of shareholders. Central banks around the world will deploy their Balance Sheets to stabilize companies. We want a mindset that is fundamentally accountable to share growth. When we start to look at where the money is, it is on the Balance Sheets of corporations. Willat is the case, we probably see some share buybacks with the exceptions of probably fundamentals and a few other sectors. We have seen highquality companies outperforming a very large amount we have heard the likes of wells fargo, goldman as well. The dow jones Market Neutral fully go that focuses on quality having its best sixday streak right now since 2009. At the same time, Goldman Sachs ranked stocks by their Balance Sheets. Right now, strong Balance Sheet companies have formed those week Balance Sheet companies by the most since 2008. I dont know if we can show a chart. There is some concern. When we saw the selloff, obviously one that started days ago. American airlines, some of the peer airlines really plummeting at the open. Atwere down . 14, closed . 10. This is American Airlines. I guess the concern here is, when we talk about the bounce back or whatever potential recovery we have. If people are not flying, is there a way they can sort of recoup that without some sort of actual bailout from the government . I do think Cheaper Oil Prices will support that. The good news is that Interest Rates are falling, money is getting cheap, gas is about to get cheaper. People are making more money but we are going to see some job description. In the end, the most crucial thing that investors need to think about, do they have the right allocation, the right kinds of fixed income and credit, and is there a hedge in their portfolio like gold, that should sustain through any system we encounter . That would be my most crucial advice. Within equities, do you want to think about being outside of the u. S. . Looking to see cases possibly start to pick in the united states. There is not going to be any we are looking at now a three months turn for the virus spreading in china. If you want to bring that into the united states, that is a good example of the data is accurate. I would say cautiously, yes. China in particular, they will benefit from the Oil Price War. Aboute what do you think some of the correlations on this market . What is it, 100 . We are all seeing the correlations with dollars, dollaroil. It seems like everything is in this lockstep move. Today, you of 80. 86 inigh 2008. Volatility is now its own asset class. A story today on the bloomberg that indicates there is a call option with a strike of 100. There are people betting at the vix its 100 this week. The Oil Price War over the weekend really got the vix jumping today. This is what i want to look at. The Energy Stocks complex relative to the s p 500. As a line goes down, Energy Stocks are underperforming the broader market. We have not seen these kinds of levels before. Iss part of the market likely to be the biggest risk factor at the moment. You have a whole industry, jobs on this boom, cheap credit and growing demand, and all of that is at risk. Now,ne joining us right as to what happened today and may have been in the future. Strategist joins us now on the telephone. Ray no, the market is trading this concern. We have to step back and ask the question. Impacth will this we juste profits and lowered our estimates for corporate profits for the s p. About 6 to just a little bit over flat. We dont think this is a disaster for me profit perspective but clearly, this will be a big hit. Scarlet we dont know how much of a hit it will be. Resorts has withdrawn its guidance. This is a moving target right now. We have not even seen the worst of it in the u. S. How do you go about coming up with earnings projections, figuring out a valuation, when so much is unknown . You raise a number of important points. First of all, we have to be really careful not to extrapolate. Youre talking about a company in the travel and leisure sector. Whether we are looking at hotels, airlines or the like, they will be under much more pressure than a company who makes cleaning supplies for your home or provide you with electricity or something else. That is an important but relatively small part of the economy they will get it relatively hard and relatively complete the other problem relatively quickly. The analyst estimates are not being updated because companies are saying, i am pulling my number. I dont know what it is going to be. When we look at the revisions to the earnings, they are not really reflecting the reality. Romaine when you start to look ahead to the end of the year, this idea that we are sort of flying blind, not sure how companies are going to fair, at least not yet. Do you get a sense that there are enough metrics out there that are painting a full share of what is wrong and what is right . The answer is sort of. Lets start with, do i believe that an Interest Rate on a 10 year bond had less than 50 basis points is a reasonable expectation of the demand for capital over the next year or so . Absolutely not. I think that is overblown. Do i believe that oil, which has 30 in two60 to months is an indication of industrial demand . Absolutely not. I think those things are overblown. Do i believe, by the end of the year, we will be in an environment that is substantially more stable . Chances are the vix is probably closer to 15 than 16 at the end of the year and that will naturally push the value of assets. Need to focus on timeframe. Trying to predict what happens tomorrow very difficult. This is goonths out, buying opportunity. Ofrlet i know this is kind an impossible question but are there any numbers that look reasonable to you . You mentioned that the 30 Year Oil Prices do not look like they reflect reality. Does anything look reasonable to you . In what sense . Scar that they are trading scarlet that they are treating where they should be trading . Probably not. We tell you the things we are looking for. That this wills turn into job losses or issues for Small Businesses. Right now, we are not seeing any strain but mostly because this has not had any chance to collate. Ifd of the consensus view is companies believe as they do that this will be somewhat temporary, and the labor market is so tight. The Unemployment Rate is 3. 5 . Companies really dont want to lay off workers because they have had a hard time finding available labor. If this resolves itself, the real key is it does not spill over into jobs market. Right now, the consensus view is that it will not it will not. Over into job markets and credit problems, you get a recession. If it does not, we basically have a really of the a really ugly episode move through it in a reasonable way. At Credit Suisse and i think the consensus view on wall street is that we are not going down that uglier path. I am looking for nearterm indications of stress in those areas. Credit, jobs. Ofre is quite a number Economic Indicators which you can follow to give you a sense of changes in those short term economics. Scarlet i hear what youre saying about looking in the credit market. I want to close out by asking you, what are some of the crowded decisions you see out there that might still have to be unwound, that might be difficult because there is this rush to the exits. The bloombergon terminal and look at the stock price movements. Nearly today, a huge moving energy. Moving oil and Interest Rates. But if you look at everything else, they are kind of together. These are not individual investors choosing to not be in one stock or another. These are people using etfs are the futures market or what have you to basically lower their risk profile all at once. So what we are going to see over the next several weeks is that people actually start to look at this with a much finer lands and say, wait a second, there is some disruption here. There are Better Companies that we can get at a discount. Someone told me they are seeing a bunch of Technology Stocks that they thought were expensive and they are getting very close to their individual by numbers to put money to work. I dont know if we are there yet but we are closer than we were there while ago. Scarlet thank you very much. Obviously, we are focusing a lot on equities. Mark nash basically talked about how credit, the market is basically broken. I want to start off with equities first. We are looking at what happened overseas. The msci emerging markets index. Really the correlation is the connection with brent crude. And correlation has resumed so when you talk about crude oil being down around 30 a barrel, you will see this drop continue, whether you are talking about equities or currencies. Back in the u. S. , and this is how it played out this morning. More than 95 of the stocks on the day declined. This is the third time in the week that we have seen that percentage of stocks fall. About talking correlations which are dragging everything down. Those correlations tie back in with the chart i showed you. This is how much you are paying to protect against default. For months or years, a lot of folks have said, not much to worry about. Relatively safe for this type of quality of bonds. At the beginning of the session, 600 basis points. The question is, how much higher does it need to go before you start to attract buyers. Some of the strategists say you need to see another 100, maybe even 200 basis points for people can get comfortable taking that kind of risk. If you start to see this go up, you will see those other charts i showed you start to go down. Scarlet we want to bring in bloomberg Senior EditorJames Crombie for more on credit. The equity market takes its cue from credit as well. How much wider do spreads need to go before they start to look at it as something completely dislocated and therefore an opportunity . We are in the eye of the storm here. What they asked now. Andal sign of panic distress. There is no real bottom insight. Are people who have cash, andnow they have yields they will come in at different levels. Investors saidof that is not really the case, the risk is not there, the elevated risk. Saying, what is different now than fouronce ago four months ago . Worries about the Macro Economic outlook, worries about earnings, all of those fundamental impacts on credits. Where within the credit market do you see the most severe sign of stress . Oil stocks. Credit is heavily weighted in oil. Roughly 10 . A lot of those names are distressed. 40 points at the open today. A tent drop pond is something a 10 point drop on a bond is something people would worry about. Dropse we also saw some on travel, American Airlines bonds drops about . 14. Anything related to travel. Cruise lines, restaurants, those things are trading at distressed levels. Scarlet where can you find shelter . Utility bonds have gone up, particularly in the investmentgrade side. People have been rotating in stronger bonds. So, the bricks and mortar, services, everything people have to use regardless of what is going on. Scarlet thank you. We have talked about equities, we have talked about credit. We know that a lot of this depends on the government response. During past economic calamities, the u. S. Government moved aggressively on the fiscal front. So far, there has been nothing. Go to david westin, from power. Rgs balance of there are reports that at the white house there are plans being drawn up for fiscal stimulus. We are told there are divisions within the white house. In the past, the government stepped up big time. One of the biggest increases in percentage of gdp. During the Great Society of lyndon johnson, spending during the reagan deficit, and of course the financial crisis. The president says he does not want to run up a deficit even though he already is. In the past, the government has been willing to step up as needed. If they do step up, is it broader limited . Do they go with payroll tax cuts or specifically people who are sick . One thing we heard from larry kudlow is that he wanted it to be temporary and microtargeted. I spoke to Larry Summers and asked him about this microtargeting thing. This is what he said about microtargeting in this situation the coronavirus. I dont think this is a microproblem. Microtargeting is going to be sufficient. The right discussion, when you talk about micro and macro is not an either or discussion. David you heard it. Larry summers thinks we should be doing all of the above, monetary and fiscal, all around the world, should be coordinated he thinks we are behind the eight ball. Scarlet pessimistic outlook from Larry Summers. Lets continue this conversation. Americaing in employee director of analysis and research. You have written about this in great detail about how the Federal Reserve and Monetary Policy only go so far. Based on what you have observed, somear along are we to get fiscal stimulus going . Thet seems like we are at very beginning. Encouraging that some things now talked about within the white house, ideas for increasing lending to Small Business, ways to enhance the social safety net. We are talking about the scale of the problems that markets are pricing in the. A shutdown of Economic Activity, we had eight dollars of funding that was passed. , we are of this shock looking at something that should really be closer to 12 percent of gdp. David there is the economics and politics. When you Start Talking about massive political intervention, you have a political football going on. I think the beginning of 2008, when we did see a divided government in an election year. We did see direct payments to households. It was not big enough in the end but it did get past in the year when there was a political football. The scenarioink is when you should see both parties get together and figure it out. That remains to be determined and obviously there is more polarization now. Larry kudlow dismissed the idea of a payroll tax. I havent heard what they would do other than cut rates. The quick answer is all of the above. It should be things targeted toward state governments. Boosting Public Health funding to states since they are the ones administering what is going on in the system and increasing the capacity. It is also about households. Sick leave, Unemployment Insurance extension, and expanding the safety net. For businesses, i think there will be some need for treasury and congress to take action together to make sure that lending is broadly available. He fed can only do so much if we are really talking about what Small Business needs, that will require the fda and congress. David do we need to decide right now . When it co