What I'm looking at - rush into defensives, more extremes, travel, China

Here's what I'm looking at:

Rush into defensives

Defensive sectors like utilities don't usually offer much protection when everything is crashing. While utilities may fall less, they will still crash with the overall market. However, defensive sectors often outperform AFTER a crash, when the market is very volatile and is trying to put in a bottom. 

The S&P 500 utilities sector gained more than 13% on Tuesday, making it the best performing sector on Tuesday (if we exclude the real estate sector, whose data is limited). From 1989-present, there has been no other day in which the utilities sector was the strongest sector that day and rallied more than 13%.

We'll need to relax the parameters to find historical cases. If we look for days in which utilities outperformed 9 other sectors and rallied more than 5% that day, all the cases occurred after the worst of the previous 2 bear markets as the stock market tried to put in a major bottom. 

While the S&P surged over the next year, it usually experienced a lot of volatility in the short-medium term.

In the 2002 case, the S&P 500 swung sideways for months before soaring.

In the 2008 case, the S&P 500 made a marginal new low before it surged in 2009.

More extremes

Plunging confidence in stocks has pushed the 20 day average of our Stock/Bond ratio below -2.73, one of the lowest levels over the past 50+ years. It doesn't get much more extreme than this - even 2008 wasn't this bad. The most recent case came just after the S&P 500's bottom in December 2018, and the most memorable case was after the October 1987 crash.

All 5 historical cases saw the S&P rally over the next 2-3 months.

Travel

It's clear that things aren't good for people in the travel and tourism industry. The coronavirus pandemic has hurt the industry significantly, and many businesses are in a cash crunch (see WSJ here and here). With bankruptcy fears mounting, the S&P 500 hotels, restaurants, and leisure sector has plunged more than -40% over the past 20 days. To call this a "crash" would be an understatement.

Airlines aren't faring much better. The S&P 500 airlines sector's 20 day rate of change is also among the lowest in history, matched only by that of 2008. Back then, the airlines sector fell a little more before bottoming.

China

And finally, Bloomberg noted that the Chinese 10 year yield has fallen to a level which in the past, was a bullish sign for Chinese equities (and moreso bullish for global equities, since Chinese equities haven't moved much in years).

This happened after the global financial meltdown of 2008 and China's economic slowdown of 2015-2016. In both cases global equities recovered over the next year.