April 8, 2020

Good morning,

Watching yesterday’s 937 point gain on the Dow evaporate to end the day -26 points is a sober reminder that the investment markets will remain volatile for the foreseeable future.  When markets respond like this to the headlines of the day, ups and downs are to be expected.  It’s the reason for the ups and downs that gets our attention.

So what does the coronavirus landscape look like today?  Based on reports out late yesterday and this morning, there is evidence beginning to show up that the original death toll estimates may have been grossly overstated based on certain models used to predict such data.  Some reports also seem to suggest that reaching the peak spread of the virus may be sooner than expected.  HCQ – hydroxychloroquine – is being more widely used to treat victims of the virus, and some physicians are reporting very positive results.  All is great news.

Now enter the economics.  Concerns of a global recession are being floated in the press today, citing consumer demand plummeting around the world.  But of course it is – we can’t even go outside much less to a store or restaurant.  But does that last forever?  Of course not.

As we have previously recognized here, we are likely to enter (or already be in) an event-driven recession.  But the bigger issue is the length of the recession.  Once the shelter in place is lifted, isn’t consumer demand going to shoot through the roof?  Restaurants will be jam packed with customers who have been locked up in their homes for weeks.  Construction projects that have been put on hold will resume.  While our world may never be quite the same post-coronavirus, consumer demand will explode, at least in the short run.  And in the process begin to revive the U.S. economy.

The glass is half full, but the near-term market volatility may cause some to spill.  No worries, recovery will happen as it always has.

Please be safe and healthy.