No Rest

No rest.  Stocks slipped yesterday on weak economic data and renewed tensions between the US and China.  The weak numbers were almost expected, the Presidential Tweets, not so much, worrying investors that a new cold war is on the horizon.




It’s all in the viewing angle. Here we are, in the midst of a historic event, and not a pleasant one either.  People are sick, dying, and out of work.  Blunt but factual. What makes the current picture even worse is that the current environment is in stark contrast to where the world was just six months ago when the US economy continuously churned out growth, unemployment was low, optimism was high, and life expectancy was on the rise.  The US stock market continued to make new highs and unicorn startups lined investment banker conference rooms as they queued up to solidify multi-billion valuations in the public equity markets.  The gig economy was on the rise, heralded in by companies like Uber and Lyft which provided income to an even broader workforce.  Today’s norm includes some very different realities in which the term “going viral” means something way different than it did in the past. Morning coffee for many Americans includes trying to avoid looking at the numbers of new infections and deaths while battling the fear of job insecurity. For those of us who have investments or work in the financial sector, morning coffee includes running down financial markets, economic numbers, global news headlines, and yes, those grim pandemic numbers. Pandemic numbers aside those other data points have been pretty awful as well.


A really smart man recently said to me in the midst of a chaotic episode, “we are here now.” Doesn’t seem like much – just four words, but those four words allowed us to stop and look at the situation from a different angle and focus on moving forward. Yesterday was one of those types of days.  Worldwide cases of the Coronavirus are now over 5 million with deaths exceeding 300,000.  Yesterday’s weekly release of Initial Jobless Claims showed that 2.4 million Americans filed first time unemployment insurance claims last week, bringing the total unemployed to 36.8 million in the past 9 weeks.  For reference, that is about 25% of the workforce. Manufacturing and Services PMI’s came in at 39.8 and 36.9 respectively.  For reference, numbers below 50 indicate contraction.  The Conference Board’s Leading Index slipped by -4.4%, falling for a third month in a row.  Corporate earnings are clearly suffering from the national lockdown.  Even sectors of the economy which are less affected are instituting cost cutting measures by foregoing capital investments, reducing dividends, cutting salaries, and halting stock buybacks.  We are here now.  In fact, all of these weak numbers should not come as a surprise to any of us and the market has come to expect them at this point. If we switch our viewing angle we might see a different picture. Although the weekly employment numbers are bad, they are improving every week.  The services aggregate, which has been hardest hit posted a weak PMI yesterday, but it too has improved from last month and will likely improve further as restrictions are slowly lifted.  The same goes for the Leading Index, which is contracting at a slower pace.  This all offers clues that even though the situation is still quite difficult, perhaps the worst is behind us.


We have a funny way of looking back at history.  When many people think of the financial crisis and last recession, they don’t quite recall the daily foreclosures on upside-down-mortgaged homes sporting “For Sale” signs, or the nearly 16 million unemployed Americans who were out of work with low-demand skills.  What many people do recall is the historic period of growth that followed bringing us up to the current crisis.  In World War II, 407,000 Americans lost their lives, marking a dark chapter in history.  When we look back at those tough times we often recall that iconic Times Square kiss photo that took place in August of 1945 (V-J Day) which marked the beginning of a great boom period for the country both socially and economically.  We are here now.




Stocks slipped yesterday as traders pondered weak economic data and dealt with new fears that rhetoric between the US and China is escalating.  The S&P500 fell by -0.78%, the Dow Jones Industrial Average dropped by -0.41%, the Russell 2000 was break even on the day, and the Nasdaq Composite Index gave up -0.97%.  Bonds advanced and 10-year treasury yields fell by -1 basis point to 0.67%.




– Next week will be abridged with US Markets closing for Memorial Day on Monday.  Later in the week we will get some more housing numbers, consumer confidence numbers, regional Fed numbers, GDP, Durable Goods Orders, and PCE Deflators. 

Check back on Tuesday morning for calendars and details.

daily chartbook 2020-05-22


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