I’m an avid baseball fan, so as I watch global stocks tumble, the immortal words of Yankee legend Yogi Berra come to mind: “It’s deja vu, all over again.”

To me, it seems like 2008…all over again. Back then, the context for the crash featured overvalued equity markets, unsustainable public and private debt, complacency born of a long bull market, civil societies riven by political turmoil, and reckless speculative behavior encouraged by deregulation.

The first domino to fall in 2008 was the collapse of the subprime housing market. This time around, the first domino is a pathogen called the coronavirus.

Will the current stock market swoon become as severe as the Great Financial Crisis of 2008-2009? Too soon to say. But as of this writing Wednesday morning, the meltdown was continuing. In pre-market futures trading today, the three main U.S. stock market indices were poised to open deeply in the red, extending the massive losses of recent days.

The villain is the fast-spreading coronavirus, which threatens the global economy. The death toll from the coronavirus now exceeds 2,700 worldwide, with the vast majority in mainland China. There have been more than 80,000 global cases.

I turned on financial television this morning, to see how TV is covering the crisis. My low opinion of these TV shows was confirmed (yet again). I heard this glib advice from a supposed financial expert: Investors should rejoice at the stock market’s big drop. The current decline is actually a buying opportunity. Scoop up the bargains with both hands!

Um, that’s actually bad advice, because there’s no bottom in sight. Stocks might have a lot farther to fall. Buying into a crash is a sucker’s bet.

Below, I’ll show you a few sensible ways to cope with the toppling of the financial dominoes, as the coronavirus epidemic grows worse and puts pressure on vulnerable economies and overvalued equities. First, let’s survey the crisis.

As White House officials this morning step to the lectern to offer soothing assurances, their fear is palpable. They look terrified. That, too, is reminiscent of 2008.

The three major U.S. stock market indices plunged Tuesday, a day after virus fears sent the S&P 500 and the Dow Jones Industrial Average to their largest daily declines in two years. The 10-year Treasury yield hit a record low as investors fled to the safety of bonds. Bond prices and bond yields move in opposite directions.

During the early stages of the coronavirus epidemic last month, investors where complacent about the flu-like illness, preferring to focus instead on better-than-expected fourth quarter earnings. Stocks reached record highs last week, but then fell off a cliff last Thursday as cases of the coronavirus spread like wildfire.

The Dow’s plunge on Monday, February 24, carries the dubious distinction of being the third-worst one-day drop in points during the Dow’s entire long history (see chart).

The deadly coronavirus has extended into several countries beyond just China, infecting Iran, Lebanon, South Korea, Italy, Spain, and Australia, to name a few. Dozens of countries are now implementing emergency measures against the coronavirus.

South Korea and Italy have reported a spike in confirmed cases with 833 and 157 respectively. The U.S so far has reported 53 cases of the virus. What started as a side issue for Wall Street has become the main show.

Read This Story: Coronavirus: Looking a Black Swan in the Eye

Both the Dow and the S&P 500 currently hover in negative territory for 2020, as losses of the past few days wipe out gains from the previous six weeks. The following chart depicts the coronavirus-induced carnage:

Investors began 2020 on an ebullient note, pushing stocks to ever-higher records. The melt-up is now melting down. Major benchmarks in Asia and Europe also are in free-fall.

John Wayne isn’t coming…

Wall Street is currently expressing hope that the Federal Reserve will ride to the rescue, like the cavalry in the final reel of an old-fashioned Western movie, by cutting interest rates. I see two flaws with this scenario:

• The Fed has firmly expressed its intention to stand pat on rates. Indeed, stimulus at this point could wreak serious damage down the road by fueling inflation; and
• The coronavirus is disrupting global supply chains and choking factory activity, problems that can’t be solved by monetary policy.

Fed Chair Jerome Powell is under enormous pressure from the White House right now to cut rates. I doubt that Powell will budge. He knows it wouldn’t do any good.

Meanwhile, the International Monetary Fund recently slashed its forecast for gross domestic product (GDP) growth in China to 5.6%, a decrease by 0.4 percentage point from its previous estimate in January.

China can ill afford a significant slowdown. Trade protectionists hold up China as an invincible boogeyman, but in reality, China is hobbled by severe debt. Recent estimates peg China’s troubled credit in excess of $5 trillion, which represents approximately half of the country’s annual GDP.

Investors fear the ripple effects of China’s slowdown will push a fragile economic expansion in the U.S. onto the ropes. The U.S. economy grew 2.3% in 2019, the slowest performance in three years, after posting 2.9% growth in 2018.

On Monday, the research firm FactSet (the data provider for Investing Daily) reported that the consensus estimate for first-quarter GDP in the U.S. has fallen to 1.5%, from 1.7% at the end of 2019. This paltry rate of projected growth in the U.S. isn’t enough to sustain significant future appreciation in stock prices.

A recession could trigger a debt crisis. Low-grade corporate debt has grown to massive proportions and it’s a ticking time bomb (another echo of 2008).

The debt bomb is under-reported in the media. Also under-reported is the extent to which medical supplies and vaccines are manufactured in China. In addition to semiconductors and high-tech components, China provides a significant volume of the tools that are needed to fight the coronavirus.

The line of dominoes is long, as bellwether indicators turn ominous. Purchasing managers indices for the services and manufacturing sectors, in countries around the world, have been falling. That signals sputtering factory activity.

The Baltic Dry Index (BDI) shipping index is another reliable indicator. The benchmark BDI has fallen during every recession. In February, the BDI hit three-year lows. Since September, the BDI has plunged 80% to about 506 points.

Amid this troubling backdrop, expectations for S&P 500 first-quarter 2020 earnings have dropped about 1% since the coronavirus starting to make news in the final days of January.

Moves to make now…

So how should you trade under these conditions? If you haven’t already, start accumulating classic hedges. About 5%-10% of your portfolio should be in precious metals such as gold and silver.

Gold is a proven safe haven during tumultuous times. Gold has enjoyed a big run-up in prices over the past year, but the rally in the yellow metal should continue. Also consider other safe havens, such as stable dividend paying stocks.

Use stop-losses when buying stocks and don’t chase ostensible bargains. Trying to catch a falling knife is usually a mistake.

There’s still money to be made in this market and the team at Investing Daily will show you how. But stick to your long-term goals. Never make dramatic moves during a market plunge.

Panic is not a strategy. Neither is greed. Keep in mind another Yogi-ism: “You can observe a lot by just watching.”

John Persinos is the editorial director of Investing Daily. Send your comments and questions to: mailbag@investingdaily.com