The coronavirus plunged a knife in the heart of our raging bull market last week. So did Sen. Bernie Sanders, I-Vt.
That’s what some top investors are saying, suggesting the stock sell-off reflected anxieties about the spreading disease, to be sure, but also real alarm that the socialist ideologue could actually become our next president. That possible outcome to the chaotic Democratic primary season was viewed as a “black swan” event; few took the Vermont senator’s candidacy seriously.
That has changed.
BERNIE SANDERS AND CORONAVIRUS COMBINED DRAGGING DOWN STOCK MARKET: CONNELL MCSHANE
Investors worry that the coronavirus could slow growth in the U.S and trash earnings for a quarter or two; of course, everyone is alarmed at the possible loss of life. But some market-makers are much more anxious that a President Bernie Sanders could impose massive taxes and new regulations which would undermine our long-term prospects and even our free enterprise system.
Consider the timing. In the lead-up to the market’s crash, two important things happened. First, former New York City Mayor Mike Bloomberg, considered by many the Democrat establishment’s best hope for derailing Sanders’ nomination, flopped big time in his first-ever debate.
The billionaire New Yorker entered the contest last fall when progressive Sen. Elizabeth Warren, D-Mass., was surging in the polls. Bloomberg feared that a weak former Vice President Joe Biden, the front-runner at the time, was not going to beat her. He proposed himself as the moderate who could best defeat Donald Trump.
By late February, Bloomberg had already spent an unprecedented hundreds of millions of dollars buying airtime and endorsements, campaigning on his successful three terms as mayor. He was rewarded with rising poll numbers and seemed like a possible winner in the event of a brokered convention.
The Nevada debate on Feb. 19 was Bloomberg’s first at-bats, a chance to be seen on nationwide TV and to mix it up with his rival candidates. Hopes were high that the pragmatic, smart businessman would emerge as the credible alternative to the fellow President Trump calls Crazy Bernie.
It was not to be. Ratings surged for the debate as millions tuned in to see Bloomberg in action, only to witness a major face plant. Bloomberg’s ascent in the polls stopped cold, and moderate Democrats suddenly confronted the very real possibility that Sanders would run away with the nomination.
In the two days after the Wednesday debate, the market started to slide, with the Dow Jones Index closing 128 points lower on Thursday and down another 228 points on Friday.
On Saturday, Feb. 22, the aging socialist from Vermont scored a shocking knock-out in the Nevada caucuses. Not only did Sanders win, but he won with 46.8 percent of the vote, a much higher tally than expected. The outcome stunned political analysts.
Up until the Nevada contest, the conventional wisdom held that Bernie’s army comprised at most 30 to 35 percent of Democrats; in Iowa and New Hampshire, for instance, he won 26 percent of the vote. Most assumed that he might win the most delegates going into the convention, but that he would never reach a majority or even a sizeable plurality. Absent a big lead, Sanders might be pushed aside at the convention in favor of a more unifying candidate.
The Nevada outcome shook that assumption. Suddenly, it appeared that Sanders had the momentum and that he might roll up victory after victory on his way to the nomination. In the aftermath, professional odd-makers gave Sanders a 57 percent chance of becoming the candidate; nobody else was close.
The Monday after the Nevada caucuses, the Dow lost more than one thousand points, kicking off the worst week since the financial crisis.
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To be sure, the spread of the coronavirus also played a major role in the market tumble. The number of people stricken outside China, and especially in South Korea and Italy, alarmed an anxious world. It became clear that the disease would inevitably wash up on our shores.
It also became clear that businesses would be damaged by the virus, as consumers began to limit their travel and activities and suppliers faced serious production difficulties from factory closures, especially in China.
Markets hate uncertainty; in a vacuum of information about the disease, the most calamitous projections gained headlines.
“Yellen Says Coronavirus Could Throw U.S. Economy Into Recession” blared Bloomberg news. “Americans Should Prepare for Coronavirus in U.S., CDC Says”, reported NBC. “Goldman Sachs is Warning of No Earnings Growth This Year,” according to Barrons.
Throwing gasoline on last week’s bonfire of stock values, Democrats chose to politicize the approach of the virus, jubilant that a weakening economy could prove President Trump’s undoing. Senate Minority Leader Chuck Schumer, D-N.Y., accused the president (without evidence) of “towering incompetence,” digging his party ever deeper into the mud.
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The coronavirus will work its way across our country, which will survive thanks to the best medical apparatus in the world and the likelihood that therapies will become available to treat the sickest patients.
Unhappily, there is no known cure for Sanders. Super Tuesday, only two days away, will tell us a great deal — including the viability of Bloomberg’s efforts and whether Biden’s convincing South Carolina win delivered much-needed momentum — both critical to Sanders’ prospects. But socialist Bernie is not going away; he has a committed group of supporters, a lot of energy and an enviable ground game.
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Many scoff that Sanders could never defeat Donald Trump in November. Heads-up folks: nearly every poll over the past several months shows the Vermont senator beating the president. Currently, Sanders is ahead by 5 points, according to the Real Clear Politics average of polls. If the coronavirus causes a serious economic slowdown or shatters confidence in the president, those odds will tilt more in Sanders’ favor.
No wonder investors are skittish. They should be.