April 1, 2020
First, we hope all of you and your families are safe and sound. It hasn’t been easy to adapt to this new norm of life, albeit, temporary. The implementation of the term “social distancing” has been a challenge for many of us who enjoy the company of friends and family, although the focus on cleanliness is welcome as a prevention for COVID19, the flu and other viruses.
March has been one of the most tumultuous months for the stock market ending the long run bull market and entering bear market territory. The passage by the Senate of the coronavirus relief package, referred to as the CARES Act, spurred investor optimism and stocks surged the last week of March despite a record number of unemployment insurance claims primarily due to the COVID-19 virus. April 2nd will bring another Initial Jobless Claims tally (for the week ending March 28th). Surveys suggest an uptick of four million, an even bigger spike than the week prior. The hope is that investors focus less on the report and remain optimist as to the positive impact that the CARES Act will make on the US economy. Following a volatile week of stock prices, the Dow recorded its best weekly gain since 1938 which included posting the largest gains in a single day since 1933. Ultimately, the passage of the massive coronavirus rescue package gave investors enough encouragement to move back into the market. Long-term bond prices also rose, pushing yields lower by the end of the week as 10-year Treasuries yields fell almost 20 basis points.
So, what’s next? The CARES Act is huge. Grinding our economy to almost a complete halt will mean gearing back up again. This will take time and will likely result in more volatility. Fortunately, we have resilient companies who have stepped up to help with immediate needs and for the most part Americans would rather have a hand up than a handout.
This event may have the effect of more manufacturing being returned to the US and less reliance on overseas supply chains. Also, work from home setups may become more prevalent in the future for many who had to scramble to work remotely. Finally, the enforcement of borders and immigration policies have now become top priority for many countries who have experienced a huge impact on their economy and loss of life from this virus.
Year to date the Dow, S&P 500 and Nasdaq are all negative at -23.20, -20.00 and -14.18 percent respectively. The 10-year Treasury is currently yielding 0.70%.
*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.