Market developments and recovery progress for April 8

A perspective from E*TRADE Capital Management, LLC 04/08/20

The latest market and economic developments:

  • Stocks closed lower on April 7 after starting the week with a massive 7% rally. Tuesday’s volatile trading session followed reports of New York’s biggest one-day jump in coronavirus-related deaths.
  • US equities moved higher in early trading Wednesday as markets weighed the reality of an economic recovery against positive news of slowing infection rates in some hot spots. 
  • Congress could meet this week to discuss an additional $250 billion aid package for small businesses. The funds would help support the overwhelming demand for the payroll protection loans originally approved in the stimulus bill passed on March 27.1
  • Economic data is increasingly showing a recession began in March, with global trade flows dropping past levels of the 2008–2009 financial crisis.2

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

  • Hospitalizations in New York have slowed for four-straight days. On Monday, the number of coronavirus patients in hospitals increased 4%, down significantly from the 20% daily increase of the past several weeks.3
  • Plans for post-lockdown life are taking shape across the world. While the US is focused on widespread testing and reopening small sections of the country at a time,4 Germany’s plan reportedly includes a public mandate for protective masks, limits on social gathering, and closely tracking infections.5 
  • Some estimates suggest 90–95% of China was back to work by April 3, noting a pickup in the commodities industry. Also, China reported no new coronavirus deaths for the first time since January.6

Some food for thought:

Yesterday marked the deadliest day of the coronavirus outbreak so far for the US, a reminder that we are still likely facing the worst of the pandemic in our nation. But markets appear to be weighing the good with the bad—if we are indeed at the inflection point of the curve, we may soon have a better idea of the timeline to recovery.

Don’t let the recent bullish momentum foster a false sense of confidence, though. Keep in mind that markets are forward looking. While we still don’t know the full extent of the economic damage inflicted by this crisis, it’s likely the market will gradually price in changes to economic conditions before they become widely apparent.

Volatile market environments like we are currently experiencing underscore the key principals of a diversified portfolio. Uncorrelated assets with varying returns in the near-term are what allow the math of diversification to work in the long-term and produce overall portfolio results with a smaller degree of risk.

Bottom line: If history is our guide, we will get through this eventually and our society and economy will adapt and evolve just as it always has. In the meantime, investors should stay the course and keep investing decisions focused on individual timelines, goals, and risk tolerance.

  1. The New York Times, “With Demand Soaring, Congress Weighs Adding $250 Billion in Small-Business Aid,” 4/7/20, https://www.nytimes.com/2020/04/07/us/politics/coronavirus-congress-small-businesses.html
  2. Bloomberg, “The Evidence Mounts That the Global Recession Is Already Here,” 4/8/20, https://www.bloomberg.com/news/articles/2020-04-08/a-brutal-march-for-trade-portends-depth-of-economic-pain-ahead
  3. The New York Times, “N.Y. Virus Deaths Hit New High, but Hospitalizations Slow,” 4/7/20, https://www.nytimes.com/2020/04/07/nyregion/coronavirus-new-york-update.html
  4. Bloomberg, “Trump Team Preps Plans to Reopen Economy That Depend on Testing,” 4/7/20, https://www.bloomberg.com/news/articles/2020-04-07/trump-team-preps-plans-to-reopen-economy-that-depend-on-testing
  5. Reuters, “Coronavirus pandemic is historical test for EU, Merkel says,” 4/6/20, https://www.reuters.com/article/us-health-coronavirus-germany/germany-draws-up-plans-to-end-lockdown-after-april-19-idUSKBN21O17F
  6. Bloomberg, “The State of Chinese Commodities Shows Recovery Taking Hold,” 4/7/20, https://www.bloomberg.com/news/articles/2020-04-07/the-state-of-chinese-commodities-shows-recovery-taking-hold

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