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Markets Update: How COVID-19 Is and Isn't Like the '08 Financial Crisis

2020-03-20

Joe Montesano, head of Americas Equity Trading for Goldman Sachs, analyzes how the coronavirus pandemic continues to add volatility to markets. Montesano also talks about parallels and differences in today's market environment compared to that of the 2008 global financial crisis.

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Welcome to exchange the Goldman Sachs Markets of gate from March twenty every week. We sit down these cross. The firm together quit take on what they're watching in markets and it's been an interesting week, were recording under slightly different circumstances. A lot of us are in work from home mode, and not I'm Jake seaward in today's gas is Joe much asylum. Como mark establish welcome job Thanks for having me before, we diamond in analysis just give us quick, Intro, explain what you do here. It golden I run are Americans equities trading as well. I have a bit of a global role in global programme trading. I then your twenty one years early dawn, does not breathing across the equities trading landscape. In my my career version of it and I'm gonna lighter. Let's talk him the week another week of extreme volatility in equity markets on the other FED cut rates to nearly zero are over the weekend. On the latter, people expect that they have a big impact.
On equity markets, but has the equity market responded to that so far? The first reaction, from a lot of our clients upon the marketplace? Was that similar reaction to the crisis, when maybe participants thought that the didn't really get the severity of the current crisis? I think that was a misinterpretation, and I think the mark has started figured that out. I think that the third is doing Basically all that it can do in that market, the dispenser. How thoroughly fairly satisfied I'd be market, often once the FED to be quicker than mere? There are probably likely to do or they want them to go outside our remit. But if you look back at him, Look at what Powell, then doing it, he's very aggressive by historic standards.
Certainly in crisis management mode and buddy following the right protocols, think what the market was looking poor was some sort of fiscal response, which of course, is not the first duty. so now we're getting at an unprecedented response or Unprecedented crisis degenerates into one As a pole, I think after twenty one years and market access and a lot of crises and uncle, I like this one it in it things ITALY's. So I'm beyond the FED calls you response. What's driving the data, they volatility. this term in financing economic, this linsky moment where a very long period of global quality, other followed by pure the extreme price volatility and, if you look past, really is two thousand and seven to nine years now there really has been much about billion ash is when the occasional, where there
crash. It is or whether there are eating incidental volatility in the acme marketplace. There's disrepair November Ngos and very very non volatile period, though now yet something that's, that's an exotic shock. This virus. and the marketplace was largely predicated upon positions, and assumptions about those position. They wonder when one can get out of them Weren'T- that we're not set up at this particular moment. So the wee wee certain I've seen a lot of them the question, which is a natural, prudent response by market participants, fight Thorstein, increased volatility. We Firstly, there are subject about as well, where we can that position quite easy, but it is our duty as liquidity providers. Now, hopefully, look what you write, your choice were per hour. Quiet,
an environment where we traditionally Goldman Sachs pride. So see what they ve been. The number of automatic treating hops are to prevent to dramatic. the decline in a single moment, housing policy lever working off for the for the markets in and what kind of signal does it send to market participants the attic is this really they back than making a seven year after the biggest twenty three percent, Gradually had him one day in eighteen, eighty, seven I believe it was between debris commission at which there was couldn't charge of finding what actually happened on anything crashing worthy came out that way that they create these bees training all a that would only skip give pause. What people realise and think about what is actually happening, hopefully again, you get a more rational players and all over the years, and since the password and integrated into the maiden, I D, regulators, credit
more cogent fashion of this happening, where's. With a little more fragmented back and make any seven, though he created these new target breakers that more market wide, unjust, really the relative to the New York Stock Exchange, and you got it they're, not necessarily designed to stop prices from going to their natural place of business. You know what this is. This is America. This beach changes are supposed to be places that are paying price discovery, but it was supposed to create positive, and I think one thing you'll find it with so much computerized trading. Now that it is, it's a pretty good idea to have even place now. How can we get him several times in the last two weeks necessarily mean that the markets from going down, but we can certainly the into realise whether, when these are intended, consequences were Borgia state
he went out, increase electronic trading, so you mention a couple times. Parallels are to do away with some of the perilous and want to see the real differences between the market response in the global financial crisis and in today's corona virus markets here yet either, because when I talk to all market participants today, like client, like my colleague There are no aid, we knew what we need to be done, and I thank them, and mortgage liquidity crisis knew the thick and always just a matter of having the gumption actually do at which Of course, living through dialogue at I'm didn't seem as if it were very obvious, couldn't heat, and yet it could be done in it. ample, though a couple things are different. Bad, like I said before it isn't exaggerate. Shop isn't like just over Levering is the third time for it to come out, but would also is different.
It's me: it's just the ability for policy response when we were almost, I posted your interest rate and even negative issues around the globe. Those like coefficient for these central. ex around the globe to queue liquidity to this system without being dead now, and this is also very different, because their liquidity is not something that is going to solve. People are living paycheck paycheck than our only paid for a while. So these are these are real. My problem is that we now have the next couple of months ago. I think, to regulate the politicians. Regulators are actually from America perspective. Presently getting their act together and doing the condemned and being very aggressive, which I think is is. Are you now now, I'm not gonna just three months in GDP. Nowhere, but as far as the responses, it is politically so
you talk to a lot of different kinds, how our clear position themselves right now and other aid bright spots across all the asset classes Oh yeah. I think there are right, but I think that any time are we going to why these bear market. recession, which is a little more and more likely? There are the issues that need to be either on line Oreo removed that our clients, after due in those those, are obviously come at times, distress time. Oh will you tell pray yet about our ability to hell. Client mitigate those difficult circumstances as well and navigate does as well as we as there is to be hoped. The I say, then, you know, if you ask me a question: just a week ago. I would send a client had not really come the realisation? What was happening me and in grand marked, were higher than by this week, was one
this week that I really ever been associated were left for three days we and we d he saw some of the process. does that you would like to see them it happened in order or less volatile buried. I'm not gonna make any opinion on whether the market with higher or lower here by users gaining some some evidence getting tradition in better shape, though Europe I had to stay, one of the things that you are probably most excited about is the fact that There has been a lot of cash raised in that? Many of our clients, especially some of the people with a longer term money, are very good position to be investing right now to be made to be aggressive, and we, forget about our position. I hope we do not do so. We are looking at some of the things tat. We had invested in over the last couple of years, especially
the human aspect of the business, where we pride ourselves on the relationship with our eyes and that's that's something that burden My answer really appreciating guarantees about I'm getting the protocol so next in all sorts of one of the primary symbols of capitalism in markets than York Stock Exchange will be closed, didn't wanna put their employees at risk arm, and so they will be moving the full electronic trading arm ass. You see, there are other changes, if a couple of exchanges that have kept summer be in the news during our arguments were pleasant minors when it gets them of being legacy for operations, dusky both Stani last Eu Republic, leading a suitable timelines NBC, and but largely up. Remember them that New York, Turkish, angels really in Malta. Now any jersey like where their turned out, whether the actual trader happy the floor is largely were opened and closed. His on the marketplace that Catalan making an impasse,
intervention one can make in arguing that does not create a bit more of an orderly open closes, but I want to argue against the boy, but largely day in the very good backup landing place well known, escape, but There are plenty of marketing exchanges. Jobbery solely electrons. We now know any time today. Jane you will always have to be cognisant of operational rest. So are we in any one year, people aren't used a similar, specific way of be careful, but in your home This is probably more in line with more electronic market bill. Ok, bye, Well, so, amidst all the drama in and the negative news in an understandable concern about the health of our of our country, any positive is that you saw this week, something he saw at the office all home. About them. or wonders watching our employees. That probably,
remotely working for a while now, some of whom were either a top my situation, their fellow day they wanted to be at home. We're very support is the outcome we will ever commissioner, then highly engaged in Lawlor at home and end up in a really buttons. The prize was dead fish out unless people ad are you personal risk situations are really engaged young people into how the first that we want to do. But just now, How much you being a part of golden attacking them, and us It's really an outlet things for them to do Walter. Well, why did we? can't can't, even if there has been another thing that comes to mind, that was really pleased them out. The active officers approach to helping the community, especially in small businesses, are alive. I personally in York, Darien and key no kind of small businesses
the local, restaurant or local Jan, or were you back meaner? Those, though the thing tat we now onset, corresponding, but members of other community night now we want to be you- want sure them were the community, really in a top of the at that summit, we're all gonna. Writing reporting that I thought it was really excited about actually giving giving my towards Turkey is causing to carve out a community which really then plug it across the thought. Well, all right, we'll just thanks for joining us this week and even supervision. So we appreciate you taken the talk about that's all, weeks markets update on exchanges, Goldman Sachs, in case, you, MR check out, are other episode this week with Goldman Sachs Global Medical director, Doktor Michael Adele, who talks about what employees and managers can be doing to stay healthy and productive. Well, looking remotely during this pandemic, thanks for listening and hope everyone staying healthy and well during this challenging time, this podcast was
where did on March, nineteen, twenty twenty all price references and market forecasts correspond to the date of this recording. This podcast should not be copied distributed, published or reproduced in whole or in part, the information contained in this cast, does not constitute research or recommendation from any Goldman Sachs Entity to the listener. Neither Goldman Sachs!
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Transcript generated on 2021-07-02.