Overnight, the global impact of the COVID-19 virus continued to escalate. Italy’s death toll increased by 475 on Wednesday, the largest daily increase recorded in any country to date.
Here at home, in New York state, there are now roughly 2,500 confirmed cases, more than in all but 10 countries in the world. Across the US, there are now over 8,500 confirmed cases, and that number is sure to skyrocket as more of us are tested.
The Administration’s Response
Many health experts and leading economists have accused the US government of being too slow and graduated in its response to this fast-spreading contagion. Despite this, President Trump has continued to insist that the response has been “perfect”, and has given himself a “10” for his actions in this crisis. Fortunately, the President reversed an earlier statement that everything is under control, and acknowledged that the virus outbreak is largely out of control.
On Wednesday, the Trump administration and congressional leaders hurried to draft a massive stimulus package intended to prevent the US economy from falling into its worst decline since the Great Depression, with concerns about the coronavirus outbreak bringing much of America’s daily routine to a halt.
Between various legislative proposals being pushed in Congress and other actions the government has taken, the Administration is advocating for an economic rescue plan expected to surpass $2 trillion, in an effort to stem the impact of the virus.
The plan includes sending two large checks to many Americans in the near-term, spending $300 billion on helping small businesses avoid mass layoffs, allocating at least $50 billion to bail out the airline industry, and devoting $150 billion to support other sectors of the economy, which could include hotels.
The Senate on Wednesday also voted to approve a House-passed bill that would spend some $100 billion on paid leave, unemployment insurance, and free testing to people impacted by the coronavirus fallout.
The Department of Housing & Urban Development (HUD) announced a 60-day moratorium on foreclosures and evictions for homeowners affected by the virus outbreak.
The US and Canada agreed to close the entire border to “nonessential travel”. Automakers Ford and GM announced that they would temporarily stop production at all of their plants in North America.
To help cope with the anticipated explosion in people needing intensive care, President Trump ordered two Navy hospital ships to be made available, and sent one to each coast.
The Stock Market
On Wednesday, the Dow Jones Industrial Average closed down a little over 1,300 points, dropping just over 6% for the day, ending at 19,902. Apparently, the 20,000 level wasn’t a psychological barrier that couldn’t be breached. However, it had traded below 19,000 earlier in the day.
The Russell 2000 index – comprised of smaller company stocks – closed the day down over 11%, and is now down over 40% for the year to date.
The US stock market has now seen all of the gains made under the Trump administration erased.
The 10-year US Treasury bond is again yielding slightly more than 1%, having dipped below 0.6% just last week. Since bond yields and prices are inversely related, this may suggest that investors are selling government bonds for cash, perhaps preparing to buy back into the stock market at more attractive levels. A more pessimistic take would be that corporations and investors are in need of cash, and are selling their most liquid investments to raise it.
Day to Day Life
At least in the short-term, our daily lives are going to remain fundamentally different than they were just a few weeks ago. Notwithstanding the dangerously naïve college students partying on the beaches in Florida, it appears that many Americans are taking to heart the sternly-worded recommendations to self-isolate and maintain social distance. Shopping malls are largely deserted, restaurants and bars are closing, and social gatherings like concerts, plays and sporting events are being postponed indefinitely or canceled outright.
As we mentioned in an earlier message, if we collectively do what is smart – cut out all non-essential travel and social interactions, effectively acting as though we’re already infected – the social and economic impact is likely to be severe but short-lived. And we will succeed in doing what the medical experts refer to as “flattening the curve”. If we don’t, if we don’t take the recommendations seriously (enough), our health care system will be overwhelmed, and many more people will become sick and die. If you’re interested in reading a study by Imperial College in London on the projected efficacy of actions that can flatten the curve, click here.
In closing, all is not lost. Our sluggish early response regrettably means that more of us will be hurt by this epidemic than was absolutely necessary. But we still have an opportunity to change our behavior, and suppress the further spread of the virus. If we’re successful, we will all relatively soon be back at work, back at school, and visiting our favorite friends, relatives, restaurants, museums and other sources of enjoyment. Economic growth will pick up again, and the markets will rebound as a result.
We remain available to talk with you about any questions or concerns you may have.