Clear skies and no traffic in Los Angeles during the coronavirus lock-down

In the midst of this pandemic, we can observe a tug-of-war over who has the authority to reopen states once this novel coronavirus crisis eases. President Trump has made inconsistent statements about his power to control the states’ actions. Governors, for the most part, have said little in opposition. Several have, however, banded together to coordinate efforts to relax the current physical distancing policies. Constitutional law experts consistently assert that the states have this authority, and not the executive branch.

West Coast States Band Together
On the west coast, Washington, Oregon and California will be acting in a unified manner. California Governor Gavin Newsom yesterday outlined six indicators he would evaluate to determine when he would relax the state’s “stay-at-home order”:

Testing – The ability to test, contact trace, and isolate and support those who are infected.

Protect the vulnerable – Prevent the infection of people who are more at risk (i.e. those who are older and are physically compromised).

Capacity – Increase the ability of the health care system to respond to a surge in cases.

Therapeutics – The availability of treatment for the virus.

Guidelines – Providing guidelines to businesses, schools, and child care facilities about physical distancing practices, which will allow them to reopen safely.

Reinstatement – The ability, based on data analysis, to know if and when to reinstate stronger measures.

The three governors provided no timeline, and indicated that the process of reopening will not come quickly; it will be deliberate and measured. You’ll know when the current physical distancing measures will be relaxed by watching the states implement Newsom’s indicators.

Getting back to some version of the old “normal” is the only way the economy can recover. As corporations begin to report first quarter earnings and forecast the next three quarters, we’re seeing the impact that Covid-19 has had on businesses.

Business Sentiment
The Wall Street Journal surveyed the 1,500 largest public companies in the US to assess the impact of the virus. The Journal found that 300 companies had withdrawn financial guidance, and 175 had suspended stock buybacks or cut dividends to shareholders. Companies are navigating unknown terrain and there is no playbook for a crisis like this.

Technical Indicators Point South
A review of various technical trading indicators suggest that the stock market is not poised for continued recovery. They almost uniformly point to downside pressure and portend a retreat from the recent gains. So, please don’t spend too much time looking at your portfolio’s recent performance. Yes, there was a 30% stock market decline and, yes, there has been a rather impressive recovery. But investors really don’t have information to assess the economic damage from the novel coronavirus. The damage is likely extensive and once that becomes apparent, we shouldn’t be surprised if the stock market backslides.

Yesterday’s Stock Market Performance
The Dow Jones Industrial average was up 559 points, or 2.4% yesterday. The S&P 500 index increased 84 points, or 3.1%.

The Path Forward
We’re now transitioning from the sprint that was required to address this medical crisis to the marathon that will be required to implement the measures necessary to maintain social health for the long-term.

Keep the faith, be safe and stay healthy.

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