The full force of the coronavirus continued to hit the world as the death count more rapidly accelerated in the U.S. and Europe. President Trump said extended social distancing guidelines would be with us through at least April, and ten million Americans filed for unemployment. China revealed that the virus is still spreading there, which was not a surprise but was disappointing. Unemployment numbers were worse than projected. Global stocks dropped roughly 3% in daily volatility that would have been considered very high a month ago but was tame compared to March. Market reaction shows much but not all of the bad news has been anticipated.

Weekly Returns

S&P 500: 2,498 (-2.1%)
FTSE All-World ex-US (VEU): (-4.4%)
US 10 Year Treasury Yield: 0.62% (-0.10)
Gold: $1,617 (+0.0%)
EUR/USD: $1.081 (-2.8%)

Major Events

• Monday – Abbott Labs said it has developed a portable coronavirus test that can give results in 5 minutes.
• Monday – Strategists at JPMorgan Chase issued a bullish forecast for stocks and other risk assets, illustrating the wide range of views on likely market impact of the virus.
• Tuesday – Under pressure to be more transparent, China said it has 1,594 “asymptomatic” cases under observation, in contrast to recent reporting of very low numbers of cases.
• Tuesday – House Speaker Pelosi said House Democrats are preparing another round of stimulus, but it does not appear to be imminent.
• Wednesday – A study by researchers at Imperial College London estimates that between 2% and 12% of the population in 11 European nations has been infected.
• Thursday – 6.6 million Americans filed for unemployment benefits last week, bringing the two-week total to 10 million.
• Friday – Russia said it OPEC and others should cut production. Crude spiked from very low levels and is now around $30.

Our Take

While coronavirus damage is going to get much worse, we are now into it. Official cases topped one million worldwide with roughly 60,000 attributable deaths. With testing only going to people severely ill in most places, the actual number of people who have or had the virus is likely a significant multiple higher than what is reported, which has some positive aspects regarding mortality rates and longer-term herd immunity.

In March, we learned the virus was going to be extremely destructive. In April, we will learn much more. Key items include if the virus has a seasonal component with declines in spring, a better sense of real mortality rates as more testing is done, and potentially how likely patients are to be re-infected if they recover. More testing and more data will be critical, and it appears we are close to getting it.

Most news this week was bad. The loss of life is horrific and scary. The job loss numbers were staggering. In the face of this, markets were down, but moderately compared to recent moves. We do not ascribe to the view that everything is “priced in”. The market reacts quickly to reality but not always perfectly. It may take some time to absorb the employment situation. If there is good news on some of the key questions listed above, markets could cheer. Hopefully we also see success in New York, Italy and Spain in moving past their peak hospitalization and mortality periods.