{"id":1938,"date":"2020-03-23T04:41:57","date_gmt":"2020-03-23T04:41:57","guid":{"rendered":"https:\/\/straussresearch.com\/?p=1938"},"modified":"2020-03-23T04:51:31","modified_gmt":"2020-03-23T04:51:31","slug":"market-comments-week-ending-3-20-20","status":"publish","type":"post","link":"https:\/\/straussresearch.com\/index.php\/2020\/03\/23\/market-comments-week-ending-3-20-20\/","title":{"rendered":"Market Comments: Week Ending 3-20-20"},"content":{"rendered":"\t\t
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S&P 500\u00a0\u00a0\u00a0\u00a0\u00a0 2305\u00a0\u00a0 -15.0% for the week\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a010-year Treasury yield\u00a0 0.94%\u00a0\u00a0 <\/u><\/strong><\/p>

The stock market continued its recent decline last week amid growing concern that the coronavirus crisis will lead to a dramatic downturn in the economy.\u00a0 The S&P 500 plunged by 15% for the week, while the Dow Jones Industrials dropped by another 4,000 points, falling from approximately 23,200 to 19,200.<\/p>

Bonds were roughly flat, as the yield on 10-year Treasury bonds stayed in the range of 0.95%, but the price of oil dropped again, falling from the $32 range to roughly $23 per barrel.\u00a0 Prices of high yield bonds fell sharply, due to their large exposure to the energy sector and the shale oil producers.<\/p>

Italy and Spain went into nationwide lockdowns, as the death toll in Italy exceeded 3,400, more than the official number from China.\u00a0 In the meantime the death toll in the U.S. continued to rise.<\/p>

On Monday, March 16, <\/sup>the federal virus task force unveiled a plan entitled \u201c15 days to slow the spread,\u201d telling the American population to maintain and adopt major lifestyle changes such as avoiding gatherings of more than ten people.\u00a0 Certain large states such as New York and California issued lockdowns, or stay at home orders for the non-essential workforce.\u00a0 These \u201cshelter in place\u201d orders could affect as many as 75 million Americans.\u00a0 As people were told to stay home, U.S. businesses and schools continued to shut down around the country.\u00a0 Retailers closed stores, factories were shut down, and many small businesses such as bars and restaurants closed their doors.<\/p>

All of these actions are expected to have a devastating impact on the U.S. economy.\u00a0 Economists estimate that the small business sector employs 40% of the American workforce, meaning that if half the workers in these businesses were laid off, the unemployment rate could skyrocket to the 20% range, a figure also mentioned by Treasury Secretary Steve Mnuchin.\u00a0 Millions of jobs could be lost in the second quarter of 2020, and mass layoffs have already begun.\u00a0 To a large extent, the U.S. economy may be essentially shut down for weeks, or even months.<\/p>

In this environment, it is almost impossible to forecast the impact on the gross domestic product (GDP).\u00a0 Major Wall Street firms such as Goldman Sachs have been making predictions that GDP growth could plunge to a negative growth rate of somewhere in the range of -5% to -14% in the second quarter.\u00a0 There is almost no visibility on how corporate earnings will look for the year ahead, and the uncertainty alone is bearish for the market.<\/p>

Extraordinary Government Action<\/u><\/p>

The government policy response to the crisis has been dramatic, with the federal government proposing a major fiscal stimulus package of between $1 and $2 trillion.\u00a0 Although the bill has not been finalized, measures may include:<\/p>

  • Direct cash payments to Americans \u2013 $3400 for a family of four<\/li>
  • Large scale loans and credit to small businesses<\/li>
  • Deferral of tax payments \u2013 tax deadline moved forward three months to July 15<\/li>
  • Paid sick leave<\/li>
  • Waiving interest payments on student loans<\/li>
  • A payroll tax holiday<\/li><\/ul>

    The Federal Reserve has also been taking extraordinary steps.\u00a0 In addition to slashing short-term interest rates to zero, the Fed is providing large amounts of additional liquidity to the financial system, and is setting up a special vehicle to create stability in the commercial paper market, which is very important for small and medium sized businesses.<\/p>

    Hopeful signs from the medical community<\/u><\/p>

    Amid all the bad news, there were some bright spots from scientists and medical researchers who have been identifying various drugs and medications that appear to have potential in fighting the virus.\u00a0 The FDA has been cutting red tape in order to fast track the development of vaccines and anti-viral therapies.\u00a0 In addition, large scale efforts have been taken to make more widespread testing available, as well as to produce more masks, ventilators, and other medical equipment.<\/p>

    Conclusion<\/u><\/p>

    Medical experts have stated that reducing the spread of the virus may require another 4 \u2013 5 weeks, or even several months.\u00a0 A debate appears to be starting on the cost-benefit analysis of a lockdown, in other words assessing the tradeoff between the medical benefits of reducing the disease vs. the tremendous costs to the economy.\u00a0<\/p>

    At this point the S&P 500 is down roughly 30% from its recent highs, and the market is very oversold.\u00a0 Stocks have priced in a lot of bad news, but amid the dramatic news developments unfolding on a daily basis, the market continues to have more downside risk.\u00a0 The market is so oversold that it could rally on any good news, but it may not be able to make any sort of sustained move higher until there is evidence that the curve is flattening regarding the spread of the virus.<\/p>

    Thus we would maintain a long-term investment perspective.\u00a0 We would not sell stocks at these depressed levels, and if the market becomes even more oversold, we would view it as a buying opportunity from a long-term standpoint.\u00a0 \u00a0\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

    S&P 500\u00a0\u00a0\u00a0\u00a0\u00a0 2305\u00a0\u00a0 -15.0% for the week\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a010-year Treasury yield\u00a0 0.94%\u00a0\u00a0 The stock market continued its recent decline last week amid growing concern that the coronavirus crisis will lead to a dramatic downturn in the economy.\u00a0 The S&P 500 plunged by 15% for the week, while the Dow […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[4],"tags":[],"class_list":["post-1938","post","type-post","status-publish","format-standard","hentry","category-market-comments"],"yoast_head":"\nMarket Comments: Week Ending 3-20-20 - Strauss Research<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/straussresearch.com\/index.php\/2020\/03\/23\/market-comments-week-ending-3-20-20\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Market Comments: Week Ending 3-20-20 - Strauss Research\" \/>\n<meta property=\"og:description\" content=\"S&P 500\u00a0\u00a0\u00a0\u00a0\u00a0 2305\u00a0\u00a0 -15.0% for the week\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a010-year Treasury yield\u00a0 0.94%\u00a0\u00a0 The stock market continued its recent decline last week amid growing concern that the coronavirus crisis will lead to a dramatic downturn in the economy.\u00a0 The S&P 500 plunged by 15% for the week, while the Dow […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/straussresearch.com\/index.php\/2020\/03\/23\/market-comments-week-ending-3-20-20\/\" \/>\n<meta property=\"og:site_name\" content=\"Strauss Research\" \/>\n<meta property=\"article:published_time\" content=\"2020-03-23T04:41:57+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2020-03-23T04:51:31+00:00\" \/>\n<meta name=\"author\" content=\"Jon Strauss\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jon Strauss\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/straussresearch.com\\\/index.php\\\/2020\\\/03\\\/23\\\/market-comments-week-ending-3-20-20\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/straussresearch.com\\\/index.php\\\/2020\\\/03\\\/23\\\/market-comments-week-ending-3-20-20\\\/\"},\"author\":{\"name\":\"Jon Strauss\",\"@id\":\"https:\\\/\\\/straussresearch.com\\\/#\\\/schema\\\/person\\\/fbcf8b9c67143127e8da9d24bd06fc08\"},\"headline\":\"Market Comments: Week Ending 3-20-20\",\"datePublished\":\"2020-03-23T04:41:57+00:00\",\"dateModified\":\"2020-03-23T04:51:31+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/straussresearch.com\\\/index.php\\\/2020\\\/03\\\/23\\\/market-comments-week-ending-3-20-20\\\/\"},\"wordCount\":824,\"publisher\":{\"@id\":\"https:\\\/\\\/straussresearch.com\\\/#\\\/schema\\\/person\\\/fbcf8b9c67143127e8da9d24bd06fc08\"},\"articleSection\":[\"Market Comments\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/straussresearch.com\\\/index.php\\\/2020\\\/03\\\/23\\\/market-comments-week-ending-3-20-20\\\/\",\"url\":\"https:\\\/\\\/straussresearch.com\\\/index.php\\\/2020\\\/03\\\/23\\\/market-comments-week-ending-3-20-20\\\/\",\"name\":\"Market Comments: Week Ending 3-20-20 - 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