Equity markets have continued to lose momentum in the past week. Most indices worldwide are trading in a slightly negative range on a weekly basis, in most cases in the range of -1% to -4%. Brazil stands out negatively with a weekly loss of more than -10%. There, the corona crisis has led to a sudden increase in deaths in recent days.
While the stock markets provided little action, the music played elsewhere on the American oil market. The US futures May contract for US WTI crude oil expired last week, reaching prices of around -$40. The sellers had to pay the buyers. This is an indication that one should not trust the current recovery of the stock markets after the violent sell-off from February to March. In normal times, oil is not negative, not even for a future contract that is about to expire.
After the corona crash sent the stock markets from their all-time highs to an approximately 30% decline within about 26 days, setting a new record that even outpaced the 59 days of Wall Street panic in 1929, the current crisis has also set a new negative record for the oil price. There are still many negative records and black swans slumbering in this market, investors should continue to exercise great caution.
The occurrence of such events is a typical crash pattern. After a first panic there is often a calming down. Then events occur that nobody expected and that lead to an acceleration of panic-like sales. In 2008, this event was the Lehman bankruptcy.
The crash protection risk model supports this current risk assessment, as it continues to show the status red for all regions and also globally. A look at the risk world map looked much better two months ago, where countries in green status are rarely available today. But you shouldn't think that there is no risk of a crash in these countries. A look at history shows that in phases of a crash, all stock markets fall in sync. Diversification no longer works in these times.