Volatility Surges (Again), the Oil Price War, and Recession Indicators Are on the Rise

While we’ve seen some recovery since Monday’s massive day-long rout, it’s been anything but smooth sailing in the markets this week. Volatility has surged—with the S&P 500 index moving a cumulative ~15% in one day—as investors struggle to make up their minds about the state of the economy. In addition to coronavirus fears, much of this week’s instability has been driven by the emerging oil price war between Saudi Arabia and Russia. Saudi Arabia slashed oil prices by nearly 10% over the weekend and is moving to flood the market, but is such aggressive pricing sustainable? We’ve already seen multiple leveraged crude ETFs being shuttered and the high-yield market hit a slump in the wake of the crash, so we’re hoping the conflict is short-lived. Meanwhile, recession probability indicators have passed 50% in the U.S., and Europe looks to be following suit. And while COVID-19 is keeping doctors busy, “Dr. Copper” carved out some time to give his two cents on the matter with the formation of a death cross—a historically reliable recession indicator. Could the trend reverse if containment efforts prove effective?