Market Update, Monday the 30th

First, some good news in the number of new cases. The John Hopkins Coronavirus Resource Center reported a drop in the total number of daily cases from 67.4k cases on Friday to 59.4k on Saturday.

We now know that President Trump has extended the social distancing guidelines in the U.S. until the end of April. The newest modeling base on known COVID-19 data has produced an upper death-rate estimate in the U.S. of 200,000 people. Knowing this number will likely help us understand (based on a 14-day incubation period and social distancing efforts) within the next two weeks how close we are to returning to a somewhat normal life again.

As the data below shows (sorted by number of deaths), many parts of the country have a small number of infections and deaths. That is part of the reason why President Trump may think it possible some workers could start returning to work in the coming weeks. There are other positive factors to consider, like evolving treatment options, but keeping the infection rate low is of critical importance. It’s up to us in terms of how long it takes to beat the Coronavirus.

Wikipedia, current number of non-repatriated cases by state
(The Wikipedia 2020 Coronavirus Pandemic page continues to evolve. At present the data is updated on Monday, Wednesday and Friday. Non-repatriated likely means the death is counted in the state it took place, not the resident state of the individual.)

Data around the lethal characteristics of the virus are hard to follow. There are some disturbing characteristics being reported and until I have a more authoritative source, it is unclear to me the true health threat of COVID-19 on otherwise healthy individuals. We do know there are several vaccine trials underway along with treatment options that involve plasma therapy and various existing drug combinations. There are a lot of reason to believe we are going to land on an effective treatment method in the coming days/weeks. Stay positive!

Looking forward, Q2 GDP is likely to be dismal.   Most economic expectations have been based on a recovery in the second half of the year. April marks the beginning of Q2. If businesses start operating again at least by the end of May, we should have a good recovery underway in Q3. Please think about different ways you can be helping the economy now and in the future.

Interestingly, Monday the stock market experienced another rally. Unfortunately, it did not qualify as a follow-though day, primarily because volume was not high enough. Follow-through days are a concept developed by stock investing pioneer, William J. O’Neil. They represent a positive day after a low in the market. There are a number of requirement and if met, a follow-through day can represent a higher probability of a market advance continuing higher. Stock breakouts were almost non-existent too, another key ingredient. The price performance was impressive but that alone is not enough, especially when the calendar quarter ends tomorrow. Mutual Funds, Hedge Funds and other institutional investors would like to end the period in the current price range versus levels a week ago.

The corporate bond market has also experienced price improvement over he last several days, another welcome development.

There is talk of more stimulus (an infrastructure bill would be helpful). Large fiscal and monetary intervention has already been dedicated to fighting the economic slowdown. Hopefully recent price action is an indication the worst of the selling is behind us but don’t be surprised if we see more in the days or weeks ahead.

In the meantime, it is nice to start the week with the stock market moving higher!

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