Monday Market Recap: March 23, 2020

Market Recap

Highlights

• Early unemployment data has begun to trickle in and estimates show more than 2 million Americans filing for unemployment checks

• Markets decline 15% for the week as coronavirus cases spread and as preliminary talks on COVID stimulus package stall

• Global cases of COVID-19 top 375,000 more than double from the previous week. The US now has over 40,000 cases, half of which come from New York State

Market Summary

Public health measures deployed to stop the virus’ spread are set to bring economic activity to a near standstill and cause a sharp contraction in economic growth in the second quarter. According to FactSet, earnings are expected to decline by -3% for the first quarter (largest YoY decline since 2016 3.2%). Although GDP data has yet to be released, expect GDP growth to fall precipitously. Most estimate anywhere from a 10-20% drop however the real damage is yet to be known. A recession is defined by two consecutive quarters of negative GDP growth, which we should expect for Q1 and Q2. However, we should expect activity to ultimately return with limited permanent damage as long as authorities deliver an overwhelming fiscal response to bridge businesses and households through the shock. Unlike previous recessions, the cause is clear and apparent, what’s not are the lasting repercussions.

The required policy response includes drastic public health measures to stem the outbreak – and a decisive, pre-emptive and coordinated policy response to stabilize economic conditions and financial markets. All of this is beginning to take shape. The Senate is currently in talks for a comprehensive stimulus bill to alleviate financial constraints as a result of the virus. A standstill is currently in place as Republicans would like dedicated funds directed to businesses, whereas Democrats look to provide more stimulus directly to the people. Central banks have cut rates and adopted measures to ensure markets keep functioning. The key here is to alleviate any dysfunction of market pricing and tightening of financial conditions. What is needed are overwhelming and coordinated policies – both on monetary and political fronts – that forestall any cashflow crunches, especially among small businesses and households, that could lead to financial stresses and tip the economy into a crisis. The UK, Canada and Australia have served as models of policy coordination. We expect a third, significantly larger, fiscal package to emerge soon in the U.S. – likely reaching $1 trillion, or 5% of GDP – although there may be twists and turns as it makes its way through Congress.
 
 
What I’m Reading –  Yuval Noah Harari: The World After The Coronavirus

I previously referenced Harari in a previous post on Why Boredom is Good For You. Harari is known for his analysis on past, present and future human behavior and how they have effected our societies and will effect our societies moving forward. Here we look at the longer lasting impacts of the virus. Specifically, as it relates to privacy and surveillance, globalization, and of course governmental policy.

This is a must read as the impacts on citizens not just in the US, but globally will be felt for years to come.
 
Fitness App I’m Using  – Nike Training Club

With gyms closed and outside activity limited, I’ve turned to this app from Nike for in home workouts. It’s quick, efficient, and has detailed prerecorded instructors to illustrate every movement in a workout series. Also unlike many paid fitness apps, there are plenty of free workouts here if you would like to instead opt for the free version.

Also, worth mentioning, if you are a runner, the Nike Run Club has been the best when for music, pre-setting routes, and built in routines for keeping you on pace along with fitting in your rest days. I’ve found this app works best with Apple Watch as well.
 

What I’m Listening To –  Small Talk Should be Banned and 9 Questions to Ask Instead

If you are tired of talking about the Coronavirus or engaging small talk in general, this is a great listen from Jay Shetty to dive deeper in your future conversations. Whether it is with someone you’ve just met or a someone you would like to grow your relationship with, these 9 questions will lead to a much better experience.

Let me know what was your favorite question was and which questions you plan on putting into practice.

Quick Take – Death of Brick and Mortar Retail

If retail and malls were in trouble before, the governmental shutdown of any citizens venturing outside will surely take its toll. Last year almost 10,000 stores closed nationwide which was double the amount in 2018. Retailers that rely heavily on foot traffic, maintain inventory, and have low margins will be hit particularly hard. Particularly if they have not yet made the shift completely online. Best Buy was a prime example of this over the past years as a result of competing with Amazon, however they have been able to bounce back due to the focus online and increased customer service.

These are the biggest stores that are currently closed temporarily, however one has to believe that it won’t be so temporary for more than a few.

I will leave this question with you: What stores can you identify that are immediately at risk for staying closed for good?

Quote of The Week
"Never underestimate human stupidity." - Yuval Noah Harari