“The night is darkest just before the dawn. And I promise you, the dawn is coming.” – Harvey Dent
Over the last week or so, the United States has been bracing for the worst of the coronavirus outbreak as Trump administration officials and Governors across the country warn people to continue social distancing. While the U.S. experienced its largest daily increase in fatalities from the novel disease yesterday, leaders like New York Governor Andrew Cuomo point out that this is a lagging indicator. Cuomo, whose state has accounted for more than a third of total cases thus far, pointed to slowing hospitalizations, ICU admissions and ventilator intubations as signs of progress resulting from social distancing measures.
Markets are starting to show more signs of health as well, in part due to the amount of liquidity support being given from the Federal Reserve through its bond buying programs. Equity markets have been settling in and even seeing some upward trends, and while some investors are enthusiastic that we will see a swift return to higher asset prices, former FED Chairman Ben Bernanke doubts a recovery will be rapid. The good news though, as many draw comparisons of this crisis to the 2008 Financial Crisis and The Great Depression, is that Bernanke sees the Fed’s response thus far as “pretty good”, says the banks are in a better spot than 2008 and doesn’t believe the economy will mirror the 1930’s.
Speaking of the FED, investors today will be waiting patiently for the FED’s meeting minutes from its March meeting. Chairman Jerome Powell held two emergency meetings last month on the 3rd and 15th of the month with interest rate cuts in an attempt to give the market’s confidence that the FED was willing to do everything in its power to help the economy fight this disease.
So far, the U.S. has mostly relied on monetary stimulus (interest rates), but Treasury Secretary Mnuchin is working to get small business loans out and checks in the hand of consumers after congress passed a record bipartisan package last month. Feedback is coming in that the initial $2 Trillion stimulus package might not be enough and thus Mnuchin and Pelosi are both working towards adding more fiscal stimulus – currently targeting $250 billion. China, where the people of Wuhan are now allowed to move freely, will be sticking to interest rate policy in an attempt to stimulate as their debt-laden economy navigates its first quarterly downturn in 30 years.
BONUS – My friends at local Detroit small businesses SPMLFD and York Project have helped set up a fundraiser to produce surgical masks for local health professionals. Let me know if you want to rock a “Social Distance Social Club” shirt at your home office and support our Detroit healthcare pros.