The rollercoaster ride continues. Yesterday, the screams were of joy and relief; however, there are more twists and turns ahead. The most important aspect of this week’s resolve is that price discovery has forged downside tests. While investors are developing the ability to compartmentalize news, such as the additional coronavirus deaths and facts, earnings, and corporate guidance, along with trends like those seen in virtually every economic category.
As wild as the ride has been, there are guardrails on the up days as investors continue to lean into defensive names, especially Utilities, and hunt value in beaten-down Industrials and Materials names.
S&P 500 Index | +4.22% |
Communication Services (XLC) | +3.60% |
Consumer Discretionary (XLY) | +3.46% |
Consumer Staples (XLP) | +4.91% |
Energy (XLE) | +2.37% |
Financials (XLF) | +3.31% |
Health Care (XLV) | +5.76% |
Industrials (XLI) | +4.13% |
Materials (XLB) | +4.15% |
Real Estate (XLRE) | +3.89% |
Technology (XLK) | +4.29% |
Utilities (XLU) | +5.67% |
Tenuous Baby Steps
So much of what’s happening in the economy and stock market depends on how well the government tackles the virus, including the task of keeping Americans informed and as safe as possible without panicking.
The House passed $8.3 billion in funding toward the end of the session, but the bickering continued. The vote 415-2 underscores the urgency, even as the bill was larded up to the gills.
Considering the monumental decline in public trust for most institutions, save the military and police, this is also a moment of truth for them and their thin credibility.
I have to say that the media has been failing thus far, although some seem to understand and care about their role in potential hysteria. This is a moment in time, and everyone will ultimately be judged, even those with the power to skew public opinion.
Trust in Institutions
- 24% Presidency (up from 16% in 2016)
- 4% Congress
- 15% Medical System
- 7% Internet
- 12% Newspapers
- 8% TV News
Consumers Less Fearful Than Media Thinks (but they’re working hard to change that)
According to Morning Consult Daily Consumer Confidence Indices, Americans continue to exhibit firm confidence even though it declined a bit.
As more states announce emergencies, while the virus spreads, maintaining this confidence will be vital.
The Team
On this note, I would like to give a shout-out to efforts of the team working on the virus around the clock:
- Vice President Pence
- Alex Azar, U.S. Secretary of Health and Human Services
- Dr. Anthony Fauci, National Institute of Allergy and Infectious Diseases (NIAID)
- Dr. Anne Schuchat, Principal Deputy Director of the Centers for Disease Control and Prevention (CDC)
- Dr. Ben Carson, U.S. Secretary of Housing and Urban Development (HUD)
And the entire task force, along with doctors and scientists throughout the nation.
Portfolio Approach
Yesterday, we reiterated a Health Care stock and went long a Technology name. 
Today’s Session
There is no news per se that would be a shock to the market as coronavirus appears to be slowing in South Korea and China is coming back online. The spread in the United States continues. The market is developing a trading range and today we’ll get a chance to see if some recent lows hold.
Interestingly, in the last few days, the curve has improved between the two and ten-year bonds.
Riding the waves and taking notes… let’s see if recent lows hold – these are the tests the market must go through.