This week we will continue with the theme of last week’s newsletter. Markets have started to recover some of their losses largely in part to U.S. COVID-19 new cases appearing to slow . This coupled with a “whatever it takes” approach by global governments and central banks has helped improve investor confidence in our opinion.
Governor Cuomo of New York, in an April 14, 2020 press briefing stated, “We think we’re at the apex on the plateau.” He and his team also estimated 10-20 percent of New York State has recovered from COVID-19 .
The day following Cuomo’s press brief, New York State saw new cases spike to a new high of 11,571. Although we are unsure if new cases are reaccelerating in New York, the state’s COVID-19 hospitalizations seem to be decreasing. According to Tom Lee of FS Insight, New York State hospitalizations have shown two consecutive days of “net discharges” . We view this as a positive. A chart from Governor Cuomo’s April 16, 2020 press briefing is shown below :
Although it is possible we have not yet seen the peak of U.S. new cases, each day the number moves lower we feel it is more likely that we have seen the peak. The chart below shows new U.S. COVID-19 cases from February 15, 2020 through April 15, 2020 . The U.S. reported total new cases of 30,206 on April 15, 2020, which is an uptick from the day before but the trend remains lower as of the same date.
However, Morgan Stanley biotech analyst Matthew Harrison provided a different perspective saying, “While we understand the desire for optimism, we also caution the U.S. outbreak is far from over. Recovering from this acute period in the outbreak is just beginning and not the end. We believe the path to reopening the economy is going to be long. It will require turning on and off various forms of social distance and will only come to an end when vaccines are available, in spring of 2021 at the earliest.” 
As we have previously stated, the range in economic expectations are as wide as we have ever seen. It appears the medical community has a varying number of views as well. Sarah Gilbert, professor of vaccinology at Oxford University recently stated that she is “80% confident” the vaccine her team is testing would work, and could be ready by September . However, other drug companies working on vaccines have provided timelines that extend well into 2021.
Last week we mentioned Tom Lee’s view that if the S&P500 exceeded 2,793 points it would indicate a 50% recoup of the selloff since February’s highs. His historical charting of the markets leads him to believe that surpassing the 2,793 point mark signals that the S&P500 intraday low of 2,191 on March 23, 2020 will likely be the bottom of the recent market decline. On April 14, 2020, the S&P500 closed at 2,846 points. Evercore ISI’s Rich Ross seems to also have a positive view of the reversal saying, “If this were a longer-term bear, the ‘bounce’ should have failed at the old uptrend line, 2,650. It busted through it quickly.” 
Leuthold Group’s Jim Paulsen recently appeared on CNBC stating, “The bending of the virus curve simultaneously across the country and around the globe has brought widespread and serious national conversations about restarting the economy. For a crisis whose primary tagline for investors was ‘that is completely unknown,’ this is perhaps the first time there is some semblance of clarity as to a timeline for the end of this sad situation.” 
Jeff Kleintop of Charles Schwab was interviewed on Squawk Box on April 14, 2020. He remarked, “The market rallied on the idea that maybe the worst of the economic freefall is over. And that we’re now talking about reopening the economy.” The chief global strategist at Schwab went on to warn, “The stock market may have a tougher time from here.” He indicated the possibility of a second wave of infections as the lockdown measures lift. 
As a final analyst perspective, Goldman Sachs’ David Kostin predicted, “The worst of the market rout is behind us. A previous near-term downside target of 2,000 [for the S&P500] is no longer likely. Our year-end target remains 3,000.” 
In summary while we feel the low point for markets has occurred, it may be likely that markets struggle to move higher in the near term as they begin to shift their focus back to company earnings and economic news. We are not market timers but instead we are long term investors. However, we want to prepare clients for the possibility of a short term pullback. We expect markets to continue to be volatile until there is a clear path for a successful treatment or vaccine. U.S. stock market history has shown us that declines happen. But more importantly the history illustrates that long term investors are better rewarded than those who try to time the markets. We hope our clients choose to be long term investors.
We will keep you updated as the markets continue on their road to recovery. We encourage you to contact us with any questions and as always wish you and your family the very best.
Dustin Padgett and Your Team at Big Sioux Wealth Management
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T. Lee, FSI Insight Blast -- April 16, 2020, FSI Insight, 2020.
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