Market Briefing For Thursday, May 7

'Back to the Future' - lacks the ability to engage 'time travel'. However it's so crucial not to see the Nation revert to the distressing (to say the least), if sobering, situation, from which we've barely contemplated emerging from.  That's valid for both the stock market and the pandemic response efforts. It all ties-together, in so many ways we all presumably are aware of. We sure don't need a President or anyone else to remind us of what dislocations, as well as disruptions, have occurred; not just in the USA, but globally.   

It's even likely that the efforts of China (not to just mislead but now) to lead restoring work and business activity, in the presence of new lock-downs, in a couple of cities where Covid-19 has recurred, has gotten the attention of Washington, and contributes to their framing the essential resumption of a degree of business and social interaction. However we are not regimented as they are; and there is already evidence of only spotty success doing it.  

Where it stands: the US was no more perfect that other big countries, tried to pretend we didn't make a lot of mistakes at the beginning, but did, and it is not a political statement, just the reality. Whether it was failure to order a rapid buildup of PPE, or block travel from Europe as quick as we did rightly from China, there were errors, which were evident in hindsight, but also in foresight, as a few (including ourselves) were stunned at the WHO 'softer pedaling' of risk, while the spread was already evident before the infamous outbreak (that really was the global epicenter) during Milan Fashion Week.

It's sort of disheartening to see the scramble that happened in the wake of third world-style responses to the pandemic, and yet we have a somewhat optimistic, even robust, take on how this goes years ahead. It does not mean we don't have really rough patches on the way to effective medical solution, but absolutely getting those treatments is truly essential.  

We have never locked-down society like this, it's more akin to Britain's war time efforts during the 'Blitz'. And the resulting (projected) market 'crash', set up the (also projected) max-fear panic rebound that bounced to where we are at now, which is a form of 'indecision' within the targeted S&P rally range. 

So, despite a month of extreme social distancing, the U.S. is trying hard to hit 'reset', while the stock market move, though led by the core technology leadership, reflects the new world we've entered. As I've said: if there was a single sector that investors would not sell (and in fact buy during panic in March) it was technology that would benefit from the cocooning trend.  

Evidence is mounting that steamrolling (borne from frustration may be a likely takeaway regarding not just Washington's, but many state's tone pushing the envelope) into reopening approaches, risks a mixed outcome.

While we don't have a 'corner drugstore' pill to take yet, nightmarish failure to control the coronavirus is a risk that 'some' models point to this summer, but clearly decisions have been made to go-forward with fingers-crossed a reasonably effective therapeutic arrives during months immediately ahead, and if so momentum will be sufficient to limit market setbacks.  

 

If not.. we'll have to contend with aspects from the get-go, such as:   

• Lack of a consistent national strategy for containment, contact tracing, testing and isolation of the infected

• Lack of emergency supplies and domestic manufacturing capacity for protective equipment and necessary drugs (everyone see this and are working to improve; but things are moving unnecessarily slowly)

• Lack of training and supplies for front line medical personnel and first responders, especially in rural areas believed by some to be spared, but which in reality are now proportionally becoming hotspots with for the most part reduced access to advanced major-medical facilities

• Inconsistent and often contradictory public policies that shuffle more than the on-the-front-lines scenes dictate (they should adjust to real conditions; as politics should play no role.. especially personalities)

• Politics will play a role with respect to funding stabilization which for the most part has calmed society and bought-time for medical staff

• Economic losses out-of-all-proportion to the cost of having an effective program in place, is the reality, and was true before Trump took Office (structure for an office or not), so it's not a blame game, but shows a reticence to take warnings clearly

• Denying culpability and pushing the burden of response onto individual citizens based on Federalism is something people don't widely accept

• Once a National Emergency is declared, Government is supposed to protect by providing true leadership even as Governors administer on a state-by-state basis (when the National Guard is Federalized for a war, they take orders from the Pentagon at that point, not home states)

• It all comes back to the race for a therapeutic drug and/or vaccine, if indeed that is achieved; the S&P will be in a partial retrace pattern

• Failure is not an option in this crisis, so leadership must convey that; should failure occur, then the S&P will find itself at lower lows

  

Conclusion: a hurried social and work reopening now, raises the risk that we'll soon be right back where we started, though I'm optimistic that merely everyone wearing masks will drastically cut-down viral exposure. Many are resistant to being compliant on this. You can hardly wear a mask eating.

Discretion remains the better part of valor given the projected recovery that is increasingly giving signs of ending for now, as we have outlined.