Market developments and recovery progress for April 15

A perspective from E*TRADE Capital Management, LLC 04/15/20

The latest market and economic developments:

  • The major US indexes fell sharply in early trading Wednesday, as corporate earnings revealed a grim economic outlook. As of April 14, the S&P 500® and Dow Jones Industrial Average closed higher in three of the last four trading days.
  • Oil prices dropped to fresh lows Wednesday morning, falling below $20/barrel.
  • Earnings results from major US banks showed massive profit declines as they prepare for defaults on loans, credit cards, and mortgages. Trading revenue, however, has been a bright spot amid heightened market volatility.1,2
  • The International Monetary Fund (IMF) released its 2020 World Economic Outlook, forecasting a 3% contraction of the global economy—the sharpest decline since the Great Depression. In January, before the extent of the outbreak was apparent, the IMF had forecasted 3.3% global growth this year.3
  • Retail sales fell 8.7% in March according to the Commerce Department—the biggest decline since the government began tracking the data in 1992.4

And here are the most recent updates on our path towards recovery:

  • Data indicates new coronavirus infections have slowed in major global hot spots. Spain, Germany, and Italy all reported fewer new cases. In the US, cases rose by 4.6% on Tuesday, below the 6.8% daily average of the past week.5
  • Groups of states on the East and West Coasts are coordinating to reopen business. The 10 states currently involved in discussions, which include California and New York, generated almost 40% of US economic output in the fourth quarter of 2019.6
  • Several US airlines announced deals with the Treasury Department for portions of the $25 billion payroll assistance program, agreeing not to furlough workers or cut pay through September 30. The industry employs roughly 750,000 people.7

Food for thought:

As we begin to digest the damage of the virus through corporate earnings and economic data, investors should bear in mind markets are forward looking, constantly reflecting new information.

While bleak retail sales, factory outputs, and corporate earnings are likely fairly priced in, markets will gradually begin weighing the blueprints to reopen pockets of the country. Right now, it sounds like these plans will be anything but normal and quick—the recovery will be long even as the economy starts to open its doors.

That said, there is some good news to be had. New infections are slowing in global hot spots and airlines’ plans to strike deals with the Treasury Department should help their bleeding expenses and provide some relief to their employee population.

Bottom line: Stay the course and keep investing decisions focused on individual timelines, goals, and risk tolerance.

  1. CNBC, “Goldman’s profit tumbled 46%, but bank posts strongest bond-trading results in 5 years,” 4/15/20, https://www.cnbc.com/2020/04/15/goldman-sachs-gs-earnings-q1-2020.html
  2. CNBC, “Bank of America posts 45% decline in first quarter profit, braces for big loan losses,” 4/15/20, https://www.cnbc.com/2020/04/15/bank-of-america-bac-earnings-q1-2020.html
  3. Reuters, “Global economy in 2020 on track for sharpest downturn since 1930s: IMF,” 4/14/20, https://www.reuters.com/article/us-imf-worldbank-outlook/coronavirus-great-lockdown-to-shrink-global-economy-by-3-in-2020-imf-idUSKCN21W1MA
  4. CNBC, “Coronavirus delivers record blow to US retail sales in March,” 4/15/20, https://www.cnbc.com/2020/04/15/us-retail-sales-march-2020.html
  5. Bloomberg, “NYC Adds to Death Toll; California Maps Reopening: Virus Update,” 4/14/20, https://www.bloomberg.com/news/articles/2020-04-13/states-team-up-on-reopening-france-extends-limits-virus-update
  6. Reuters, “Ten U.S. states developing 'reopening' plans account for 38% of U.S. economy,” 4/14/20, https://www.reuters.com/article/us-health-coronavirus-usa-states/ten-u-s-states-developing-reopening-plans-account-for-38-of-u-s-economy-idUSKCN21W1D6
  7. CNBC, “US airlines, Treasury Department reach agreement billions in aid,” 4/14/20, https://www.cnbc.com/2020/04/14/coronavirus-aid-us-airlines-treasury-department-reach-agreement-in-principle-on-aid.html

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