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SUMMARY
The stock market witnessed a major sell-off on 9th March and has seen high volatility since then.There were two distinct trends driving the sell-off. Firstly, the increasing number of Coronavirus cases in the U.S and other countries outside China is causing mounting concerns of a global economic slowdown. Secondly, a sharp decline in crude oil prices after Saudi Arabia increased production in a price war with Russia.Morgan Stanley (NYSE: MS) stock fell 10% over the last 5 trading days (March 9- March 13) and is down by a total of 28% since early February, considering the impact that the outbreak and a broader economic slowdown could have on the consumer activity.The company generates around 50% of its revenues from its investment banking and sales & trading business, which could get negatively impacted due to lower consumer activity levels and economic uncertainty.Further, as the economic condition deteriorates, it would become expensive for the bank to attract funding, negatively impacting its lending operations.However, going by the trends seen during the 2008 economic slowdown, Morgan Stanley stock will likely bounce back strongly and potentially outperform the market as the crisis winds down.In this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500.
2020 Coronavirus/ Oil Price War Crisis
Timeline of 2020 Crisis So Far
12/12/2019: Coronavirus cases first reported in China1/31/2020: WHO declares global health emergency.3/9/2020 to 3/12/2020: S&P 500 sees 17% drop over 4 days, as U.S. cases accelerate and oil prices crash, amid Saudi led price war.
Morgan Stanley Performance During 2020 Coronavirus/Oil Price War Crisis
Morgan Stanley stock declined by about 10%
since Monday, March 9th (through March 13) and the stock is down by about 28% since February 1, after the WHO declared a global health emergency.In comparison, Goldman Sachs, which is a investment banking giant, saw its stock fall by about 25% since early February and by about 8%
since Monday (through March 13).View our analysis for Goldman Sachs here:
2007-08 vs. 2020 Crisis Comparison: How Did Goldman Sachs Stock Fare Compared with S&P 500?
MS Stock: Key Values During 2020 Crisis
% Change for Key Dates: 2020 Crisis
S&P 500 Index Performance During 2020 Coronavirus/Oil Price War Crisis
On the other hand, the S&P 500 declined by 9% over the last 5 trading days (through March 13) and has fallen by 19% since February 1, after the global health emergency was declared by the WHO.
S&P 500 Index: Key Values During 2020 Crisis
% Change for Key Dates: 2020 Crisis
2007-08 Financial Crisis
Timeline of 2007-08 Crisis
10/1/2007: Approximate pre-crisis peak in S&P 500 index9/1/2008 - 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)3/1/2009 - Approximate bottoming out of S&P 500 index1/1/2010 - Initial recovery to levels before accelerated decline (around 9/1/2008)
Morgan Stanley Stock Performance Over 2007-08 Financial Crisis
Morgan Stanley stock declined from levels of around $51 in October 2007 (the pre-crisis peak) to levels of around $16 in March 2009 (as the markets bottomed out) and recovered to levels of about $25 in early 2010. Through the crisis, Morgan Stanley's stock declined by as much as 68% from its approximate pre-crisis peak. This marked a sharper decline than the S&P which fell by as much as 51%.However, the stock recovered strongly, rising by 53% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period
MS Stock: Key Values During 2007-08 Crisis
% Change for Key Dates: 2007-08 Crisis
MS Stock: Cumulative % Change from 10/1/2007
S&P 500 Performance Over The 2007-08 Financial Crisis
The S&P declined from levels of around 1540 in October 2007 to levels of around 760 in March 2009 and recovered to levels of 1120 by January 2010. Through the crisis, the S&P declined by as much as 51% from its approximate pre-crisis peak.
S&P 500 Index: Key Values During 2007-08 Crisis
% Change for Key Dates: 2007-08 Crisis
S&P 500 Index: Cumulative % Change from 10/1/2007
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2007-08 vs. 2020 Crisis Comparison: How Did Morgan Stanley Stock Fare Compared with S&P 500?
2007-08 vs. 2020 Crisis Comparison: How Did Morgan Stanley Stock Fare Compared with S&P 500?
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