Bay Area Lockdown – Day 11

By March 27, 2020Weekly TGIF

This was another record week. Stocks had one of the best weeks in history. The Stock Market saw the best three-day bounce since the Great Depression. Of course, it followed one of the worst. That’s what Bear Markets do. It sure has been nice to see the recovery rally. It’s just not to be trusted yet. Volatility remains highly elevated. Things can’t bottom until the Volatility index subsides. It’s a process that requires tremendous patience. Alka-Seltzer helps too.

The Senate passed the relief bill unanimously. It’s a $2 Trillion package. The House has now approved it too. It heads to the Oval Office for signature. There will likely be much more aid coming ahead as the cost for recovery will be massive.

The Fed has gone big and quite quickly. The Federal Reserve balance sheet is now over $5 Trillion. That’s a record. It exploded by more than half a Trillion Dollars in a week. That is twice the pace of the weekly expansion during the Financial Crisis. Its primary goal is to keep credit flowing to all corners of the market, including Treasuries, commercial paper, municipal bonds and corporate bonds. Fed Chair Jerome Powell said there was essentially no limit to the Fed’s emergency lending ability and doesn’t see inflation resulting from current policies.

Inflation is not an issue. Lives and jobs are. The assistance needs to keep flowing to the hospitals and health care facilities. It needs to flow to those now out of work and the small business owners with revenues that just got shutoff. Think restaurants and dry cleaners and flower shops, among so many others. Small business accounts for 70% of employment. It’s the lifeblood of America.

Crisis brings opportunity. Greatness shines. The heroes are the doctors and nurses and all the medical professionals that are working tirelessly, risking their own health, to assist others in their time of need. Same goes for pharmacies, grocers, food distributors and first responders.

Retailers are stepping up to fill a void as hospitals and healthcare facilities throughout the country experience shortages of personal protective equipment. Gap, HanesBrands and Ralph Lauren are all shifting production lines to manufacture face masks, scrubs and gowns, and are pushing their supply chains. Target and Home Depot are redirecting coveted supplies to frontline healthcare workers. Starbucks is giving free coffee to medical professionals. CVS is delivering prescription drugs for free to seniors. That is inspirational. That’s doing good for the greater good.

For the time being, the US Economy is at stall speed. The biggest question remains how bad and how long. Treasury Secretary Steve Mnuchin said he expects this shock to be short-lived, and that recovery will take shape heading into the Fall. We are hearing more and more of this kind of optimism. That would be fantastic. We just think it’s going to be a much longer process and road to recovery. The President said he would like to have the US Economy back open for Easter. That seems highly improbable. There is still so much unknown about this virus. Perhaps the most important words spoken this week came out of the mouth of Dr. Fauci, someone who everyone should listen to:

“You don’t make the timeline. The virus makes the timeline.”

We will continue to be working steadfastly on your behalf indefinitely in our scattered remote locations across the Bay Area. Have a nice weekend. We’ll be back, dark and early on Monday. We are ready for whatever comes our way.

Mike

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