Contagion of fear, uncertainty infect financial markets

The rapidly deteriorating health of the financial markets is being driven by a contagion of fear and uncertainty about a global pandemic that's infecting the economy in ways that seemed unfathomable just a month ago.

It almost seems like a distant memory now, but shortly after the President Day's holiday weekend the benchmark S&P 500 index closed at a record high, buoyed by another round of impressive quarterly corporate profits that had convinced investors the damage caused by a fast-spreading coronavirus in China would cause relatively little damage. Anyone who glanced at their 401(k) statements then probably at least smiled and may have even flirted with the idea of retiring a little early.

Now, those thoughts seem like pipe dreams as people mostly wonder if and when life will be normal again during a week that has seen most commerce shut down in Silicon Valley — a vital cog in the economy — against the backdrop of canceled St. Patrick's Day traditions throughout the world.

Most experts now believes a U.S. recession is inevitable, with its severity the only question left to be determined. “It's a fait accompli," said Michael Yoshikami, CEO of Destination Wealth Management in Walnut Creek, Calif.

No wonder the S&P 500 now stands roughly 30% below its peak after a mind-boggling four weeks like no other in the financial markets. The pummeling would have been even worse if not for several robust, although short-lived, rallies that were fueled by hopes that the government might come up with a financial antidote that would prevent the fallout from the corornavirus outbreak from becoming as bad as it is now.

The market's wild swings have been exacerbated by the computerized trading programs that hedge funds create to wager on the financial market's up and downs. Those algorithms, coupled with the lightning...