The helicopters are being warmed up – we might be closer to a bottom than you think

France's Emmanuel Macron has vowed that no business will go bust © Getty

published 17 March 2020

“No company, of any size, will be allowed to go bankrupt.” That was French president Emmanuel Macron last night, as he declared war on the coronavirus.

Back in 2012, European Central Bank boss Mario Draghi managed to stop the eurozone rot by declaring he would do “whatever it takes” to protect the euro. Will Macron’s quote go down as the “whatever it takes” moment of this crisis? I don’t know. But it certainly marks a radical shift. Last time, we just underwrote the banking system. Now we’re in a world where the government is promising to underwrite the entire economy.

Governments are starting to act

Markets had another brutal day yesterday, despite the heavy intervention of central banks. That seems to have helped to galvanise a bout of action on the part of governments.

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Last night, French president Emmanuel Macron told the French population to stay at home for at least two weeks barring non-essential travel (ie, going to work and shopping for food).

He also promised unlimited financial support for those businesses or employees affected, and announced that there would be €300bn of state guarantees for bank loans to companies. “No business whatever its size will face risk of bankruptcy.” That really is quite a promise. And he’s far from the only one making it.

We’ve got chancellor Rishi Sunak – who already announced a pretty far-reaching relief package during the Budget – now working on something bigger and better which is set to be announced today. That almost certainly has to provide relief for the leisure industry given that we’ve all been warned not to go to pubs, or restaurants, or cinemas and the rest of it.

In the US, America is finally taking it all seriously and even some Republicans are talking about simply handing money out to individuals. I think we will need to see proper action from this direction before the market actually hits a bottom. I can also imagine that the political wrangling over it could result in a lot more volatility.

That said, I think we’re starting to get an idea of what the bottom might look like. Which is slightly better than falling into a bottomless pit.

It’s right to feel scared – but do remember that crashes are always scary

Look, I’ll admit that I'm nervous and somewhat disorientated. There’s the “real world” aspect of having a rapidly-spreading potentially fatal disease spreading through the population. I don’t personally feel vulnerable (not yet anyway), but like the rest of you, quite a few people I care about are.

The sensation of having travel restricted is also unpleasant. My family is relatively far flung – again something I’m sure a lot of you identify with – and the idea that we’re all going to be on lockdown isn’t nice. (I mean, it’s not as though we’re hopping on planes to see each other every other day – but I like to know the option is there).

So yes, this feels very odd and unpleasant, and I have no qualms about admitting that this is worse than 2008. Or at least, it’s certainly very different and the kicking that markets have taken reflects that.

That said, 2008 also felt disorienting while it was under way. It’s very easy to forget that from more than a decade on. While everyone is quite blasé about it – these days, none of us bats an eyelid when a central bank casually says it’s going to print another few billion – it did feel like the end of the world at the time.

It did feel as though perhaps there was no solution to all this, and that it would make a permanent mark on the global economy (it did, but not exactly in the way that everyone feared, I think).

So this is different in practical terms. But the psychology is not that different. And I feel that we’re getting close to the point where action by the authorities gets ahead of the market’s perception of the situation.

That doesn’t mean we’re at the bottom of the market. Some of yesterday’s moves had a “maximum panic” feeling about them, but that doesn’t mean prices won’t fall further – just perhaps at a steadier pace. And as I said, the measures are not clear yet. There’s a good chance that the first crack at it won’t be sufficient, which will spur another slide.

However, I think that if there are items on your watchlist that you are looking to buy, then you probably won’t be kicking yourself in a year’s time if you start drip feeding your money in now.

We’ll have a lot more on this in the next issue of MoneyWeek magazine, out on Friday. Subscribe now if you haven’t already – we’ll keep you abreast of what’s going on so that you can stay calm, and we’ll also flag up the best potential opportunities, so that you can protect and hopefully grow your pension pot as well. Click here for more.

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John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.