Pro Perspectives 4/1/20

April 1, 2020

As we enter the month of April, we'll begin seeing data to reflect the abrupt stoppage of the economy. 

It's going to be ugly. 

The big one to kick it off will be the employment report on Friday morning.  That's why stocks started the month lower. 

To be sure, the media will make a big deal about big, record-setting numbers.  Stocks will swing around in the early stages of these data reports. But remember, the losses reflected in the coming data have already been offset by intervention from the Fed, the Treasury and Congress — intervention that replaces more than a quarter of U.S. economic output.  

On that note, there's a big difference between the current situation and the Global Financial Crisis.  During the GFC, we watched the dominoes fall for well more than a year, before we knew how policymakers would respond.  For some time, we didn't know if they would act.  We didn't know what tools they could use.  We didn't know how far they could go.  But when they (and other global policymakers) went all-in, with 'whatever it takes' that has forever changed the landscape.  

With this crisis, there has been (and remains) a big 'unknown' on the human welfare front.  But there has, all along, been an important 'known.'  We knew policymakers would do whatever it takes.  And they responded quickly, and erred on the side of overreacting. That's very positive. That's important perspective, as the ugly economic data rolls in, reflecting an unprecedented stoppage in the economy. 

The most important data and news will continue to be on the health crisis front (not on the backward looking economic data).  And the mitigation efforts continue to look encouraging, as testing has increased, and the daily new cases declined in today's report, for the first time since the testing ramp (24,742 to 22,613).