CEE Stock Market Report for March 9 – March 20

By: The Quinnipiac University Economics Research Team, Jack French

Source: Own calculations based on data collected from each index.

As bad as the end of February and beginning of March was, the last two weeks have been significantly worse. All of the central European indices are down more than seven percent with some down nearly twenty percent in the last two weeks. The US S&P and UK FTSE are down sixteen and fourteen percent respectively. The US has entered a bear market ending the longest bull market run in history. The dramatic drops for US equities include the worst week since 2008 and the worst single day since black Monday in 1987.


In addition to sharing the generally sharp downward trend, most of the indices had similar bumps and dips as news broke about the contracting of the global economy and the world’s central banks announced stimulus plans to counteract it. In a case where markets are driven largely by external events this correlation is expected. This is a very rare situation, and the estimates that the markets would spring back by May in a v-shaped recovery are becoming increasingly questioned as economies around the world struggle to understand the depths and length of the crisis.

Source: Own calculations based on data collected from each index. The first graph shows the previous week’s performance. The remaining graphs show the three-month performance of each of the indices.


All of the indices are now showing considerable year to date losses. In the last three months the US S&P is down about 28% and the UK FTSE is down roughly 31%. In comparison, the Slovakian SAX has only fallen six percent. The Czech PX has dropped 34%, the Hungarian BUX lost 33%, the WIG 20 is down 30% and the Romanian BET is down 25%. There has now been a month of considerably heightened volatility and severe downtrends across the CEE indices as well as in the US and UK. Even some traditionally safe assets like gold have seen some sell offs as investors have needed to liquidate holdings. US treasuries have seen yields driven to record lows as a result of increased demand for what is still seen as a very safe asset.


An increasing number of firms are closing down at least some of their operations. As a result there is increasing need for government aid to companies that are losing significant revenue. The short and long term costs of this outbreak are enormous, but the economies will eventually recover.


Interest rates are being cut to near zero percent or lower but investors are still concerned that this won’t be enough to counteract a recession in this case and that direct cash payments to citizens doesn’t offer enough assistance to those losing their jobs. A very long term outlook would view this as a buying opportunity where investors could purchase shares of very solid firms at discount prices. However, anyone buying now has to be willing to lose money in the short term and it’s still unclear what the duration of the short term is.

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