Morning Express: March 16, 2020
Fundamentals: The settlement detailed above can do some justice in describing last week’s chaos. Think about that for a minute; the S&P gained 227 points or 9.2% on Friday, but still lost 268 points or 9% on the week. On Thursday, we led off with; “This is the panic”. By midweek, Covid-19 was not just a tale from overseas or a joke among friends on social media; events were being cancelled, lives were becoming altered and at that point the economy was expected to grind to a screeching halt. Markets began preparing for the worst; widespread shutdown of an unknown length and an outbreak topping 100,000 in the U.S over the next month. Saudi Arabia added uncertainty last weekend by beginning a Crude Oil price war. The ensuing plummet of energy prices one week ago was its own Black Swan event. However, what was uncertainty last weekend has helped to quickly value the severity of this situation from a deflation standpoint and simply from an awareness level. This is a virus throwing punches and one that can only be met with punches; Saudi Arabia’s prerogative was extreme but necessary in their eyes to save their interests and stimulate demand. As of Sunday, 3400 cases have been reported in the U.S, school districts have been shutdown and travel is being limited [from abroad, but state to state could be next]. Here in Illinois, the Governor announced all bars and restaurants must close to dine-in customers through March 30th. In other words, all economic activity is grinding to that aforementioned screeching halt.