Market developments and recovery progress for March 27

A perspective from E*TRADE Capital Management, LLC 03/27/20

Below are the most recent market and economic developments:

  • Stocks posted their third consecutive day of gains on March 26. It was the first time since February the S&P 500® has had three straight up days. 
  • But the market looked poised to snap that winning streak, as stocks started Friday’s session down more than 3%.
  • The Senate unanimously passed a $2 trillion stimulus package, which includes financial aid for individuals, small businesses, large corporations, hospitals, and state and local governments. The bill is expected to be passed by the House today and would then go to President Trump to be signed into law.1
  • The most recent jobless claims numbers revealed more than three million workers filed for unemployment for the week ending March 21—nearly five times the previous record high.2
  • China announced it will prohibit foreigners from entering the country as new domestic cases of the coronavirus in mainland China have slowed to near zero.3

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

  • Federal Reserve Chairman Jerome Powell offered some encouraging insight in a rare live interview with the Today show. While acknowledging the US may already be in a recession, he pointed out that, unlike many other past downturns, there is currently “nothing fundamentally wrong with our economy.” He also pledged the Fed will continue to “aggressively and forthrightly” support financial markets.4
  • President Trump is expected to meet with the coronavirus task force this weekend to discuss plans for reopening the US economy. Among options mentioned, the President is considering classifying counties by risk level in order help track the spread of the outbreak and determine which areas may be relatively safe to resume business.5
  • Health care products provider Henry Schein developed a new rapid blood test for the coronavirus that can provide results in 15 minutes. Since the test measures antibodies, it can also help determine whether individuals have recovered from the virus—including health care workers.6

Some food for thought:

We are now in the thick of things: Reported cases continue to climb in the US and our economy remains largely shuttered. Although we had some good news this week in the form of a massive economic stimulus package and surging stock market, three days of rising equity prices doesn’t mean the coast is clear. This week’s staggering jobless claims provide a glimpse of what’s ahead.

Has the market bottomed? While the S&P 500 jumped approximately 20% from Monday to Thursday, these large price movements are common in volatile environments. During the financial crisis, for example, the market rebounded nearly 20% from October–November, only to fall another 33% to its bottom in March 2009. So, in short, it’s too early to tell.

But one thing we do know is that the Fed and US government have pulled out all the stops to help support the economy and financial markets. 

Bottom line: Although investors may still need to get comfortable with volatility, we saw the potential benefits of diversification and asset allocation play out over the past two weeks. These strategies add value over the long-term as well, as they help reduce portfolio risk and generally lead to better risk-adjusted returns.  

  1. Bloomberg, “Pelosi Predicts Quick Stimulus Passage and Pivot to Next Steps,” 3/26/20, https://www.bloomberg.com/news/articles/2020-03-26/pelosi-predicts-quick-stimulus-passage-and-pivot-to-next-steps
  2. The Wall Street Journal, “Record Rise in Unemployment Claims Halts Historic Run of Job Growth,” 3/26/20, https://www.wsj.com/articles/the-long-run-of-american-job-growth-has-ended-11585215000
  3. Bloomberg, “China Seals Borders to Most Foreigners Starting Saturday,” 3/26/20, https://www.bloomberg.com/news/articles/2020-03-26/china-to-suspend-foreigners-entry-starting-saturday
  4. Today.com, “Fed chairman Jerome Powell: There’s nothing fundamentally wrong with our economy,” 3/26/20, https://www.today.com/video/fed-chairman-jerome-powell-there-s-nothing-fundamentally-wrong-with-our-economy-81231429587?playlist=mmlsnnd_todayarchivesthursday
  5. CNBC, “Trump to review options to ‘open the country up’ as US coronavirus cases pass China, Italy,” 3/26/20, https://www.cnbc.com/2020/03/26/coronavirus-trump-will-hear-options-this-weekend-on-plan-to-reopen-economy.html
  6. The Street, “Henry Schein Says Rapid Test for Coronavirus Available,” 3/26/20, https://www.thestreet.com/investing/henry-schein-says-rapid-test-for-coronavirus-available

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