Wednesday, Mar 18th 2020

Going up on a Tuesday


Talk about ups and downs.

After a start to the week that appeared to be one of the worst in decades, on Tuesday, markets ripped sharply higher in a stunning reversal of some of the prior day's losses.

The S&P closed the day up +6% after the Trump administration unveiled an eagerly anticipated fiscal stimulus plan with an aggregate value of potentially $1 trillion.

Unlike the monetary stimulus that markets have largely brushed off to date (i.e., cutting interest rates, quantitative easing), the fiscal stimulus plan is expected to directly impact American households by offering direct cash payments to American citizens.

While the exact extent of the direct payments is still being finalized, based on the comments made at the press conference, we would expect details and the actual payments themselves to be made in the very near future.

We're pleased with this policy announcement and believe it signals that the Trump administration is moving in the right direction in terms of devising action plans that matter to the American workforce and by proxy the U.S. economy and markets.

More positive news came out later in the day, as FedEx hinted on its earnings call at a better-than-expected outlook for the economic recovery in China, where management now estimates aggregate economic output is 65-75% back online and rising.

This read-through came on the heels of reports that Chinese officials had just approved human safety tests for an experimental coronavirus vaccine - just one day after U.S. officials had announced the same.

In aggregate, we believe the day's news provided a welcome breath of fresh air for concerned (and increasingly self-isolated) consumers and investors.

While we believe market volatility will continue to remain heightened as global case count growth continues to accelerate, we think today's developments offer a tiny glimpse into how markets might behave when the rate of change in case growth and related negative news flow truly begins to decelerate.

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