April 3, 2020

Good Friday morning,

In a relatively quiet day of trading, the markets seemed to focus on the treatments for Coronavirus (CV) being tested by the medical research community – some very positive news – and gained 470 points in the process.  Chloroquine and hydroxychloroquine and a Z pack seem to be the treatment of choice for a growing number of physicians who actively treat CV patients.

Now enter this morning.  The new jobless claims report (as of March 12) was being announced at 5:20am PDT, and the U.S. Labor Department estimated 100,000 new claims with the unemployment rate increasing to 3.8%.  Upon announcement, the harsh reality of the economics effects of the CV were realized, with 701,000 new jobless claims and unemployment rising to 4.4%.  Oddly, the Dow futures actually improved a bit on the news.

News of the death count in New York is weighing heavy on the markets today in another day of wild trading.  As we can see, the market is reacting to the headlines of the day, going up in any semblance of good news, going down on anything else.

Also weighing heavy on the markets is the fact that this jobless report is only through March 12, and the real employment crunch came after that.  Some analysts are predicting the unemployment rate to hit 10%.  But rather than focus on the depth of the decline, we are instead focused on the speed of the recovery.  We believe the pent up demand of the average American, along with the liquidity that the Fed has put into the economy, should result in a rapid return to consumption and, therefore, re-employment.  While we normally follow supply-side economics, this will be a demand-driven recovery.

Please have a great weekend, be safe and healthy.