As for the economy, the backstops are in place to hold us over for about three months.  The economy was on path to hit about $22 trillion of output this year.  If we combine the $2.2 trillion relief package from Capitol Hill with the Fed’s liquidity injections, guarantees and lending power, the sum of intervention is said to be north of $6 trillion.  That replaces more than a quarter of economic output.  

With that, stocks have bounced aggressively, and will likely find a level shortly where volatility subsides, and a (relative) holding pattern will commence.

Then it boils down to whether expectations will be beat, meet or missed (disappointed) on the health crisis front.   On that note, we talked on Friday about the potential for a positive surprise to come this week.

This week we should start hearing stories coming out of New York about the efficacy of hydroxychloroquine – a treatment option for Covid-19. 

Tragically, this has become highly politicized since Trump mentioned it, which means half of the country has immediately dismissed it. 

Let’s look at the facts:  It’s an FDA approved drug for the treatment of Malaria. The FDA authorized “off label” use for it last Tuesday, enabling doctors to treat coronavirus patients with it.  There is an “in vitro” study from Chinese researchers in early February that showed the stop of progression of coronavirus in cells that were already infected, and showed the prevention of infection in pre-virus cells.  And there are small studies from both China and France showing efficacy.  Additionally, we have heard along the way from China, South Korea and Europe of success stories.  And we are hearing more and more success stories in U.S. hospitalized patients. 

So, New York will be the litmus test, as they are running an 1,100 patient clinical trial, and they are more broadly administering it as a treatment as of last week.  From the studies, the treatment period, from inception to virus free, was between four and six days.  So we should be hearing soon, at least “anecdotal” evidence from the NY cases.  Again, this “treatment” scenario has not been a focus for markets.  We could get a positive surprise.  

Now, while stocks have bounced aggressively, with nuclear-level global policy intervention, we haven’t seen the inflation bets bubble up just yet.  We will likely need some signal from the health crisis, that a light at the end of the tunnel exists (i.e. a viable path to normalcy).  

Until then, gold remains contained in the mid $1600s, under the highs of the year.  Copper prices remain weak.  And oil prices traded to new 18-year lows today. 

Trump was due to have a call today with Putin today, in attempt to bring Russia and OPEC to the table to reverse the oil price collapse.