Week Ending


Stocks were up for the week by 10.74% in the US and 10.07% outside the US. On Monday, the Fed stepped in and said it would buy unlimited amounts of Treasury and mortgage bonds but the market shrugged it off, investors were more concerned that Congress did not seem close to passing a relief bill. Stocks fell by 2.84%. But that all changed on Tuesday, as stocks had their best day since 1933 as stocks soared by 9.48% on hopes that a massive stimulus deal was close to passing. Treasury Secretary Mnuchin and Democratic leader Chuck Schumer announced they were close to finalizing a deal. The rally continued on Wednesday (+1.30%) and on Thursday (+6.07%) before falling on Friday by 3.19%.

The three-day rally from Tuesday to Thursday was good for a 17.74% advance in the overall US stock market. But if you measure from the Monday low to the Thursday high, stocks shot up by 20.22%. It was the best three-day run since October 5 to October 8, 1931, when the Dow was up 22.33%. That is not the kind of company you want to keep, as that was in the heart of the Great Depression. From that point in 1931, the market went up another 10.4% until November 9 (up by 34.81% from October 5) and then stocks would fall by 64.71% until the Dow bottomed on July 8, 1932.

On Friday, Congress passed and the President signed a $2 trillion dollar federal relief package. That represents about 9% of GDP and its purpose is to keep some semblance of economic stability for the next few months. There will need to be more in the coming months.

The shutdown of the economy is a shock we have never experienced before. In the first week, unemployment claims went from 271,2000 to 3.28 million. There will millions more let go in the coming weeks.

Are we headed for a depression? The 1930s never saw any kind of government help especially like we are seeing now. With government support, the odds of a depression would be less, but we have never seen a forced shutdown of the nation. In a worst-case, if this virus keeps the nation and the world shut down for quarters, rather than weeks or a month or two, it cannot be ruled out.

We are going to take the positive view that the country will peak out in new cases sometime in April, cases will ramp down along the same timeline that they ramped up, and then widespread testing, tracing, quarantines, social distancing, and other common-sense measures can keep the virus under control at the same time the country, or at least parts of the country, can get moving again. And, more importantly, we get saved by science in the form of therapeutics and then a vaccine. That, plus government support, avert the worst and get the economy moving again.

Former FDA Commissioner Scott Gottlieb wrote this on Twitter on Saturday, “April will be a hard month but we’ll get through it. This will end. We need to stick with current strategies. We can look toward May as a month when we carefully transition to a new posture. For now, [the] focus must be on supporting healthcare systems, preserving life, ending epidemic spread,”

How long the nation is sidelined and how long it takes to get the virus under control will be the major determinants in when we can begin to recover and how long that will take. While it now seems like any recovery would be measured in years, civilization has often surprised. This is what John Stuart Mill wrote in 1848,

“What has so often excited wonder, is the great rapidity with which countries recover from a state of devastation, the disappearance in a short time, of all traces of mischief done by earthquakes, floods, hurricanes, and the ravages of war. An enemy lays waste a country by fire and sword, and destroys or carries away nearly all the moveable wealth existing in it: all the inhabitants are ruined, and yet in a few years after, everything is much as it was before.” John Stuart Mill, Principles of Political Economy, 1848

The number of new cases, which is the key metric to plot the growth of the disease, seems to have plateaued in Italy at around 5,500 to 6,000 cases per day for the last week. If the stay-at-home measures that are in place in Italy are working there, and if the experience of Korea and China holds, there should be a consistent decline in new cases soon.

In New York, it is too early to say if the peak has been reached but the new case count has not expanded in the last few days.

But cases in the USA and Florida continue to increase.

On the therapeutic front, many companies, universities, and research labs are working around the clock to develop drugs to help. As an example, Regeneron Pharmaceuticals (REGN) has identified antibodies that could neutralize the virus. Clinical trials should start in June. Roche (RHHBY) already has clinical trials underway for an existing drug called Actemra. Abbot Labs (ABT) announced a test that can detect Covid-19 in five-minutes. These are just a few examples.

On the investment front, in regards to equities, we would lean towards high-quality companies with strong balance sheets, consistent earnings over time, and high return on equity. Equities that are in a position to benefit from a stay-at-home nation can also be considered. Contact us with any questions.


Week Ending 3/20/2020


  • US stocks lost 15.26%. The S&P 500 is 32% off its high.
  • The Fed cuts rates to zero.
  • The economy is brought to a “sudden stop.”
  • Unemployment claims are going to explode.
  • Every Dow drawdown greater than 30%.
  • There is no playbook.
  • Ready or not Modern Monetary Theory is on the way.
  • How to get out of this mess.


Stocks lost $4.3 trillion in value, and are now down by $12 trillion since the start of the bear market on February 14, according to Wilshire Associates. The S&P 500 was down 14.55% last week and is now off 32.23% from the high. The overall US stock market as measured by the Vanguard Total Stock Market Index (VTI) was down 15.26% for the week.

Last Sunday, the Fed announced they would cut interest rates to 0% to 0.25%, essentially as low as they can go without going into negative territory. Trump acknowledged that a recession might be on the way. Stocks then fell by 11.38% on Monday. Stocks rallied on Tuesday as the Fed began to try to help the debt markets to function better. Equities were hit hard on Wednesday, down by 5.76%, as stocks, bonds, and commodities all fell in unison in a race to raise cash. The Dow fell to below 20,000 for the first time since the beginning of 2017. Stocks had a small rally on Thursday, up 0.74%, after central banks put into place a series of measures to help the global economy. On Friday, stocks fell by 4.08% and closed at session lows as investors worried about exploding jobless claims and Goldman Sachs said Q2 US growth would fall by 24%.

Oil fell during the week to less than $20 per barrel.

The economy has essentially been brought to a “sudden stop” as hotels, restaurants, schools, and many other “non-essential” businesses have been closed. Social gatherings of more than a few been eliminated. In the span of a couple of weeks, we have become a stay-at-home nation in the attempt to slow down the spread of the Covid-19.

This is an experiment that has never been tried before, and it remains to be seen what the consequences are, but the stock market is not waiting to find out, assuming the worst, and then later thinking, it will be worse than that. A recession is almost definite and some are even mentioning the “D” word.

Unemployment claims hit 281,000 last week, which is up from 211,000 the week before. We have been close to 50-year lows on claims for a long-time, but this spike is just the beginning. There will be an avalanche of layoffs on the way. Treasury Secretary Munichin said unemployment could eventually hit 20% without government intervention. Other economic indicators were worse, the NY Fed Empire Manufacturing index fell to -21.5 from +12.9 in February, the biggest drop ever. The Philly Fed diffusion index for current activity fell to -12.7 from +36.7 last month, the lowest reading since 2012.

The Fed has been trying to do all it can, cutting interest rates, and trying to support the debt markets, but even treasuries have been falling in price of late. Interest raises have been rising, possibly due to the deficits that every country around the world is about start financing on a scale never seen before. Congress has already passed an $8.3 billion public health spending bill, followed by another $100 billion dollar bill for free virus testing and expansion of paid sick leave, and they are now working on a trillion-dollar-plus deal.

But for the most part, investors don’t see it as enough.

What happens when you close down large parts of the economy? We are about to find out. In the past, outside of the Great Depression, drops of 30% in the stock market have been good buying opportunities. But it feels like there is a lot more downside.

There is no playbook for this. The US has never voluntarily shut down large parts of the economy for a virus. Not in 1918 for the Spanish flu or any of the others. The government is attempting to do all it can, although no one has articulated a clear plan, other than throwing as much money as possible at the problem. Of course, one of the long-term problems is that the government doesn’t have any money to throw. We will be adding trillions to the already out of control debt. So ready or not, Modern Monetary Theory, the darling of the ultra-left, is about to get a real-time tryout.

What happens going forward is a function of what letter type recovery we have. If we get a “V”, then we have a somewhat quick recovery and before you know it, we are back to where we were and then beyond. A “U” would imply whenever we hit bottom, we stay there for a period of time (maybe extended time) and then ramp up to where we started. An “L” would be the more negative scenario, where we stay at a diminished level of economic output for a much longer time.

Last week we wrote that the country needed to take tougher measures to get the virus under control. We moved in that direction in a big way this week. That is what it will take to “flatten the curve”. Once China peaked out, the number of new cases began to decline daily (as if you are looking at a bell curve), and if the numbers are too be believed, there are relatively few new cases at this point. Time will tell if China can keep the numbers down.

If the US is fortunate enough to get to peak new cases in the next 10-days, we would next be on the downside of the curve, and then we can slowly begin to get back to a normal existence faster than almost everyone now believes. I may be way off base here and much too optimistic, but let’s hope. Some areas, like NYC, where there is a big breakout, might need longer. It took 50-days of quarantine in Wuhan to break the virus.

Whenever the US attempts to begin to get life back to normal, there has to be a rigorous test and trace program. South Korea set the standard (see above). Any sign of symptoms requires a test, and if positive, immediate quarantine, and then a trace of any possible contacts. The country needs a massive education program on how to wash hands. Any public business or place needs to have hand sanitizer readily available. We must practice social distancing and have regular temperature checks. We need to follow common sense. That is the only way to help keep the numbers down once we begin to dig ourselves out of this and until therapeutics and a vaccine are ready. With all of that, we can begin to return life to normal sooner rather than later.


Week Ending 3/13/2020


  • Stocks fall by 9.74% for the week.
  • We are now in a bear market, off by 27% as of Thursday.
  • An all-out price war between Saudia Arabia and Russia exasperated the sell-off.
  • Life changes in the US as lots of things begin to shut down, but more needs to be done and quickly.
  • China has shown great success in getting the virus under control.
  • We don’t think the world is coming to an end!
  • Some advice from Baron Rothchild.


Stocks got hammered again, falling by 9.74% in the US and international markets dropped by 13.74%.

(price of VTI – Vanguard Total Stock Market Index)

The week did not get off to a good start. The price of oil collapsed on Monday after Saudia Arabia and Russia got into an all-out war for market share, each trying to max out on production. Oil prices went into a tailspin and the equity markets followed, fearful of mass defaults on loans to the energy sector in the US. Stocks in the S&P Energy sector fell by a stunning 20% on Monday and by 8.03% overall. Energy prices were already way down from the coronavirus but this was another shock at the wrong time in the wrong place. West Texas Intermediate fell 25% to $31.13 per barrel and Brent Crude, the international benchmark, dropped 24% to close at $34.36. It was the biggest decline since the Persian Gulf War in 1991.

On Tuesday and Wednesday, stocks traded gains and losses, up by 4.96% on Tuesday followed by a 5.06% loss on Wednesday.

On Thursday, stocks suffered their biggest loss since the crash of 1987, falling by 9.72%. Aside from 1987, there were only three other days where the market suffered a bigger fall, and they were all in 1929 (10/28/29, 10/29/29, and 11/6/29). That put stocks officially into a “bear” market, a decline of 20% or more. At the Thursday close, the Vanguard Total Stock Market Index fund (VTI) was down by 27.44% from the February 14 high. The US started to shut down on Thursday as some schools, Disneyland, and the NBA all announced closures.

Markets rallied by 9.10% on Friday as Trump declared a National Emergency and was close to a deal with the Democrats on a relief package. Trump’s declaration of a national emergency opens up access to $50 billion in financial assistance for states and localities. The Fed said it would buy $33 billion of bonds to improve the functioning of the markets and would make $1.5 trillion of short-term financing available. As of the close Friday, stocks were down by 20.83% from the high and down 16.92% year-to-date.


Italy which has been hit hard has basically shut down for a few weeks. Trump announced a ban on flights to and from Europe. Europe has become the new epicenter of the disease and the US is probably not far behind. All of the major sports leagues and the NCAA have postponed or canceled their seasons. Schools in at least 12 states, including Florida, are going to be closed for a few weeks, and public gatherings of more than 200 or so are either prohibited or are being canceled. The aim is to “flatten the curve” so that Covid-19 cases don’t pop in such a manner as to overwhelm the health care system.

While the measures above may seem tough, they are probably not enough. A full lockdown of the country (except for essential type businesses) similar to what China did, will probably be necessary to stop the virus in its path. And the US will have to act fast before it becomes too late. Cases in the US will begin ramping up immediately if we follow a similar path to China (see graph below). But China has shown the path on how to get the virus under control.


Apple announced they will close all stores outside of greater China until March 27th. Tim Cook, Apple CEO, said that “the most effective way to minimize [the] risk of the virus’s transmission is to reduce density and maximize social distance.” The fact that stores will be open in China, but closed outside China, tells you all you need to know about how successful China has been in, at least so far, turning the tide on Covid-19.

While the virus started in China and was exploding there, so far about 80,000 plus cases, from the time new cases had reached 250+ on January 23, China peaked in new cases only 17 days later on February 10th, and remarkably, has been declining ever since. There have been less than 40 new cases reported in China every day since Tuesday, with only 11 on Friday and 18 on Saturday. China has shown the virus can be beaten and in short order. That is the bright spot that shows it can be done. That is the path the US needs to follow.

It remains to be seen if China can keep the numbers down as they return to normalcy. But for now, the turnaround is nothing short of remarkable and the US and the rest of the world will have to learn from China’s success. That will require quick action which at least for now, doesn’t seem like it is coming. There are a lot of half-measures now in place in the US but it will take a full-court press to beat down the virus.


While there is a feeling of panic in the streets (and the markets), we don’t think the world is coming to an end. Although life and financial markets can get much worse before they get better. China (as well as Korea) have shown that the virus can be brought under control. Furthermore, this is not the first pandemic. We wrote a couple of weeks back about the Spanish Flu, the Asian Flu, the Hong Kong Flu, and SARS and they all eventually faded. While Covid-19 is probably the worst since the Spanish Flu (1918), at some point there will be therapeutics and a vaccine to knock it out, and until then, there will be lots of tough adjustments to life. Fast and strong measures can work. China and Korea have shown that. China seems to have turned around the growth of the virus in less than a month, time will tell if it can keep it down, but so far it is encouraging. Governments around the world will be pouring in billions, probably trillions, to support their economies. Once the turn in the virus happens, we are hopeful that economic growth will quickly rebound.

During past flu scares, governments never took the kind of actions we are seeing today. So how this plays out economically is an unknown. There is a legitimate worry that there is too much corporate debt out there, and a weak economy will throw a lot of companies overboard. The near-term economic future is unknown and will get worse before it gets better. While we would hope for a V-shaped economic recovery, there is the risk of a U shaped recovery, where the economy falls and then goes sideways for a while, and then increases back to normal.

But these are the kinds of moments that the legendary investors have taken advantage of in the past. As Baron Rothchild famously said in the 18th century, “the time to buy is when there is blood in the streets.” He learned that from the Battle of the Waterloo against Napoleon.  If history is any guide, unless we are going to go into a Great Depression, investors with a long-term focus and that are not overallocated to equities for their risk tolerance (consult a financial advisor) should consider taking advantage of this sell-off. We would not be jumping in all at once, to be clear, stocks can certainly decline a lot more from here, but small purchases here and there in financially strong companies, now and as the market declines further should work out over time. Of course, there are no guarantees. No one knows what the future of the stock market holds, but buying at times when it hurts the most has usually worked out.



Week Ending 3/6/2020


  • Stocks finish flat for the week but explosive volatility in between.
  • Economic numbers, highlighted by a strong jobs report, indicate the economy was accelerating economy before the impact of the virus.
  • Interest rates continue to plunge.
  • The yield on the S&P 500 now exceeds the 10-year yield by the most since 2008.
  • Joe Biden is now the favorite to capture the nomination for the Democrats.
  • The coronavirus continues to spread but while absolute numbers are small the economic impact will be big.


US stocks advanced for the week by the thinnest of margins, +0.1%, but it didn’t feel that way as stocks were way up or down every day. International stocks fell by 1.19%. Here is how it broke down day by day in the US:

The momentum from the late market rally from the prior Friday continued on Monday with the 4.14% advance. But that was reversed on Tuesday as the market fell late as the Fed was holding its news conference announcing a 1/2 percent interest rate cut. News of Joe Biden’s Super Tuesday performance helped the market rally by 4% on Wednesday. Then coronavirus fears dropped the market on Thursday. Friday was more of the same but stocks rallied 2.36% off of their lows late in the day to close down by 1.86%. Add it all up and stocks were pretty much flat for the week.

The wild ups and downs reflect the fact that no one knows how bad the virus will be and what will be the ultimate impact on the economy. Economic numbers that were reported this week were good, and show a US economy that is improving. The Atlanta Fed’s GDPNow model raised the Q1 estimate of growth to 3.1% from 2.7%. It was a blockbuster jobs report as nonfarm payrolls increased by 273,000 (the estimate was 175,000) and the unemployment rate dropped to 2.5%. December and January’s numbers were revised up by 243,000. But most of the survey was done before the coronavirus accelerated in the last couple of weeks. No one expects anything close to that for the next few months.


The Fed on Tuesday cut interest rates by one-half point to a range of between 1% and 1.25%. It was the first time since 2008 that the Fed cut rates in between scheduled policy meetings. The market immediately sold-off on the news, probably realizing a rate cut would have minimal impact on the supply-side shock to the economy. Meanwhile, interest rates plunged. The 3-month treasury bill now yields 0.45%, which is down from 1.27% last week and 1.55% at the end of last year. The two and ten-year yield fell by about 37 and 39 basis points for the week. The 10-year yields an all-time low of 0.74% and the 30-year is at 1.66%. High-yield bonds are now at 5.05%, up from 4.62% last week. The falling interest rates indicate fixed income investors expect some bad times ahead.


The differential between the yield on the S&P 500 and the 10-year treasury are now at the highest levels since 2008. That doesn’t mean the bottom is in but stocks are attractive based on this valuation measure.


Biden’s surprise surge on Tuesday has vaulted him to be the front-runner for the Democrats according to fivethirtyeight.com. Along with the Tuesday performance, all of the remaining candidates have dropped out, giving Biden has an 89% chance of winning the Democratic nomination.


The coronavirus continues to spread but while absolute numbers are still small. the economic impact will be big. According to Johns Hopkins, there have been 107,000 confirmed cases as of Sunday morning and about 3,600 people have died. In the US, there are 440 cases over 32 states. The fear factor and efforts to minimize the spread of the virus are beginning to have a real economic impact. Cases in the US will probably skyrocket over the coming days just because testing will be going up dramatically.


Week Ending 2/28/2020


  • Stocks drop into correction territory in record time falling 11.45%.
  • The biggest point drop in the history of the Dow on Thursday, falling 1,190 points.
  • Interest rates plunge, the 10 and 30-year Treasury yields are at all-time lows.
  • A look back at the Spanish Flu, the Asian Flu, the Hong Kong Flu, and SARS.
  • The dividend yield on the S&P 500 exceeds the 30-year Treasury yield by the most since March of 2009.


Reality finally caught up to the stock market this week as US equities fell by a stunning 11.45%. It was the fastest decline into correction territory (a 10% drop from the high) ever and the worst week since the financial crisis. Despite news going into last weekend that the growth of the coronavirus (Covid-19) was possibly getting under control in China, outbreaks in Italy, South Korea, and Iran woke investors up to the fact that maybe there is a problem here or even a big problem. Micheal Ryan, the WHO’s chief of health emergencies, outlined three possible scenarios: (1) the virus can be contained, (2) the virus develops a regular pattern of continual or seasonal transmission, or (3) it becomes a pandemic. Goldman Sachs said that earnings would be flat this year, indicating two straight years of no earnings growth.

Stocks fell 3.3% on Monday, 3.1% on Tuesday, 0.6% on Wednesday, 4.4% on Thursday, and 0.7% on Friday.

On Thursday, the Dow fell by 1,190.05 points, the biggest one-day point drop in history (not percentage drop) as panic over the Covid-19 spread, putting the market into correction territory.

Stocks weren’t the only financial instrument to fall, interest rates also plunged. The yield on the 10-year Treasury dropped to 1.16% on Friday, an all-time low and 11 basis points less than the July 2016 low. The 30-year bond fell to 1.67%, another all-time low.

Where the economy goes from here is really a guess at this point. Ultimately it depends on how the virus plays out and how much of the economy might shut down, both in the US and around the world. Economic growth was starting to pick up around the world, but the virus may be enough to put recession fears back on the front burner. It is impossible to know how Covid-19 plays out, but this would not be the first virus to put a scare into equity markets.


The Spanish flu was a severe pandemic from 1918-1919 that infected about 1/3 of the world’s population. About 50 million people died worldwide and 675,000 in the US. This flu had a case-fatality ratio of greater than 2% making it a category 5 on the CDC Pandemic Severity Index (the worst possible level). Obviously, communication, medicine, and technology were not then what they are now, so the timing of the virus is not that precise, and the effectiveness of treatments was nowhere near what they would be today. The virus started in the spring of 1918. Using a 4/30/1918 start date, the market advanced by 20% over the next 12-months. However, it should be noted that there was a 40% decline prior to the virus from November of 1916 until December of 1917. Also, the Spanish Flu occurred towards the end of World War I so there were lots of other factors to consider which might have had a greater impact on the market.


The Asian Flu was a category 2 flu pandemic that started in China at the beginning of 1956 and ran until 1958. It reached the US in June of 1957 and killed 70,000. This flu occurred in two waves, and the second wave, which began in November was more severe. Worldwide estimates of fatalities range from 1 to 4 million. From the end of June until the market low at the end of October, stocks declined by 14%. However, the Fed had tightened monetary policy in the two years prior which led to a recession, there were also worries that the US was losing the cold war to Russia after the Soviets launched Sputnik, the first satellite to orbit the earth.


The Hong Kong flu began in July of 1968 and hit the US in September of that year. This flu was highly contagious and it spread rapidly. By December it had spread throughout the US. The virus peaked between December of 1968 and January of 1969. The flu killed one million people worldwide and 34,000 in the United States. The case-fatality ratio was below 0.5%, making it a category 2 disease on the Pandemic Severity Index.  From September through November, stocks were up by 9.6%, but the market would then slide by 17.4% from December until July. The market went sideways through the end of the year and would then full much further in 1970. However, in previous research I have done about this time period, the flu is not even mentioned, and the market decline started as the flu was peaking. That was an era of high flying stocks, an IPO craze, Nixon, the Fed got tight on money, inflation was accelerating, there were riots and crime so factors were the probable causes of the decline.


The SARS virus was limited in scope but deadly, spreading to 8,000 people and killing 800, mainly in Asia. The virus ran from late 2002 until July of 2003. From the January peak until the March low, stocks fell by 14% over a two-month period while the 10-year yielded about 3.5%.


In the four examples above, three were associated with sell-offs of between 14% and 18%. Although it is not clear the flu was even the main cause of these sell-offs. As of now, stocks are off by 12.6%. If the flu plays out to become a major economic event and pushes the economy into a recession, the sell-off could get a lot worse over time. But if it turns out to be a minor blip in the backdrop of a slowly improving worldwide economy, this could represent a buying opportunity. The likely scenario is somewhere in between, but until the picture becomes clearer the uncertainty of where the market goes is much higher than normal. And this does not even factor in that the lead Democrat in the primary race is Bernie Sanders.

One thing for sure, the sell-off in stocks and fall in bond yields, while not erasing the high p/e ratio of US equities, has made stocks look attractive to bonds at this time. According to David Wilson from Bloomberg, as of Thursday, the dividend yield on the S&P 500 now exceeds the yield on the 30-year Treasury bond by 24 basis points, the most since March of 2009.

In a world where the 10-year treasury yields 1.13% and the 30-year yields 1.65%, here are some examples of stocks with a financial strength rating of A++ by Value Line and big dividend yields:

To be clear, we are not recommending these stocks, but pointing them out as examples of some of the opportunities now available after this week’s damage. Of course, if the virus really damages economic activity, they may not be such good deals right now and would turn into better opportunities later.


Week Ending 2/21/2020


  • Stocks fall for the week.
  • Treasury yields continue to fall, 30-year is at an all-time low.
  • Good economic news.
  • Gold is racing higher.
  • Apple warns due to coronavirus.
  • Japan faces risk of recession.
  • Bernie marches on.


Stocks fell for the week by 1.05% in the US and 1.48% x-US. Bonds rallied by 0.53% as treasury yields continue to fall. The 30-year Treasury yield closed the week at 1.90%, an all-time low. The 10-year yield closed at 1.46%, the lowest level since 2016. The 3-month, at 1.56%, yields more than the 10-year indicating an inverted yield curve, a signal for a possible recession.


But economic news was for the most part positive. Housing starts and building permits were strong, beating expectations by more than 100,000. Regional Fed reports from New York and Philadelphia were also strong. The Atlanta Fed’s GDPNow model increased estimated Q1 growth from 2.40% to 2.60% and the NY Fed’s Nowcast was increased from 1.39% to 2.01%.


But gold is racing higher and is now at its highest point since February of 2013. Indicating worries about economic growth and exploding deficits around the world.


Apple announced on Monday that it won’t hit its projected revenue targets for the current quarter due to the impact of the coronavirus. Apple did not quantify the impact of the virus, saying it was too early. But Apple will be the first of many to announce lower earnings and sales as a result of the virus. There is hope that the spread of the virus is starting to slow, the trend is now lower on both a linear and exponential basis, indicating, that if reports are accurate, the virus might be getting under control.


Japan faces the risk of a recession. The country took an initial hit in the last quarter as the economy contracted at a 6.3% annualized rate due to a 10% rise in the national sales tax on October 1. Now, the coronavirus is hurting tourism and manufacturing.


Bernie Sanders won the Nevada caucuses cementing his lead for the Democratic nomination. A poor performance by Mike Bloomberg at the debates this week dropped hopes of a moderate nominee. For now, and it is early, it looks like a Sanders-Trump matchup. The market is counting on a Trump victory but nobody knows what will happen. But Trump is cheering Bernie on (and trying to stir up some trouble), writing on Twitter, “Looks like Crazy Bernie is doing well in the Great State of Nevada…Congratulations Bernie, & don’t let them take it away from you!”


Week Ending 2/14/2020


Stocks finished higher,  +1.77%, and +0.82% outside the US. It was another record close for US stocks. This, despite the fact that the coronavirus continues to shut down a portion of the Chinese economy, Bernie Sanders is the current Democratic frontrunner, and equity valuations are on the high side. There seems to be a huge disconnect. Or maybe it makes sense, bonds yield almost nothing, the 30-year yield has been dropping and is now at 2.04%, not far from the all-time low of 1.94% from last August, central banks remain supportive, and many think the coronavirus is a one-quarter phenomenon. A big risk is if inflation remerges, which would change the calculus on all of the above.


Trump set out his long-term plan for the budget, aiming to cut budget deficits by half as a percentage of the economy by 2024 and then by another half by 2029. The budget does not forecast any recession during that time period and of course, is light on the details of the proposed spending cuts.


Week Ending 2/7/2020


  • Stocks are up by 3.2% in the US and 2.1% x-US.
  • Another strong jobs report.
  • Macy’s to lay off 2,000.
  • Tesla’s stock continues burning higher.
  • Solid ISM report.
  • The trade deficit falls slightly.
  • A disaster for the Iowa caucuses.


Stocks had a big week advancing by 3.2% in the US and by 2.1% around the world. Bonds fell by 0.38%. Stocks were all but oblivious to the fact that a good portion of China has been paralyzed by the coronavirus. Markets were probably helped when China pumped billions of dollars into their economy to help offset the economic impact of the virus. Tesla’s stock has been on a parabolic rampage (see below).


The job market continues to be the strong point in the US economy. The US added 225,000 jobs last month, the unemployment rate ticked up to 3.6% from 3.5% due to an influx of new workers, and wages climbed by 3.1% compared to last year. Some of the job gains were attributed to mild weather in January. The three-month average of 211,000 is now trending above the 12-month average of 175,000.

But while jobs across the entire US economy are strong, brick and mortar retailers continue to be hammered, especially department stores. Macy’s announced that it will close 15 stores over the next three years and eliminate about 2,000 jobs.


In a move reminiscent of bitcoin or some of the internet highflyers from 1999/2000, TSLA was up by 447% from its June 3rd intraday low to its intraday high on Tuesday (2/4/2020). The stock closed the week down 22.7% from that point. The Company, which has been a favorite of the bears, has turned around investor sentiment from possible bankruptcy, too, according to famed investor Ron Baron, a possible $1 trillion in revenues within 10-years. Currently, Tesla has a free cash flow yield of 0.8%, and at its current market cap, Tesla is selling for $367,000 for each car delivered in 2019, while GM is valued at $6,400 per car, and BMW is at $17,000 per car.


The Institute for Supply Management’s manufacturing index came in at 50.90, back in expansionary territory for the first time since July and up from 47.8 in December. The survey was mostly conducted before the coronavirus outbreak. “The outbreak of the novel coronavirus in China is likely to significantly disrupt activity in 1Q20. The inevitable disruptions to China, as well as potential spillovers to the rest of the world, should become visible starting with the February report,” according to J.P. Morgan economists Joseph Lupton and Olya Borichevska.


The US trade deficit fell for the first time since 2013 to $617 billion from $628 billion last year. Exports fell for the first time since 2016, but imports fell even more, obviously due to tariffs. China dropped to third place as the biggest US trade partner, behind Canada and Mexico. A smaller deficit is likely a sign of weaker demand and slower worldwide growth.


The primary season officially got underway with the Iowa caucuses on Monday. Unfortunately, it pretty much turned into a disaster due to software problems. Results still are not complete yet, but so far Pete Buttigieg and Bernie Sanders are about tied with each getting about 26% of the delegates.


Week Ending 1/31/2020


  • US stocks drop by 2.2% and international stocks were off by 3.38%.
  • Bonds advanced by 0.76%.
  • Fears of the coronavirus set stocks back.
  • Q4 growth was 2.1%, 2.3% for the year.


US equities fell by 2.2% on the week on fears of the spread of, and economic impact from, the coronavirus. Since the virus broke out on January 17th, stocks are off by 3.11%. The timing is about in line with the market peak in January of 2018, stocks were on a daily climb similar to what we have seen this year, almost every day until January 26, when trade war talk triggered a quick 10% drop. Time will tell whether we get a similar follow-through this time around.

International stocks took a bigger hit, down by 3.38%. Investors fled into treasuries, advancing bonds by 0.76%. The 3-month/10-year yield curve inverted, as the yield on the 10-year Treasury bond dropped by 19 basis points to 1.51%.


There are now six cases of coronavirus confirmed in the US, and about 10,000 around the world, and there have been 200 fatalities. The economic impact is being felt in China. Hong Kong suspended high-speed rail to China, and reduced airline flights. The Shanghai Disneyland has closed and Starbucks has temporarily closed about 1/2 of their stores. Airlines have canceled many flights to and from. Millions of Chinese are in lockdown. Chinese stocks are down by about 11% since the outbreak. Sectors that have been hit by the virus (in terms of equity prices) are airlines, tourism, and oil and gas.

Believe it or not, the name though has created some confusion, as some actually think the virus and the Corona beer are connected. Search engines have been flooded with inquiries about the “beer virus” or the “corona beer virus”.


The Bureau of Economic Analysis reported that Q4 GDP grew by 2.1%, in line with Q3. For the year, GDP was up by 2.3%. Personal consumption, which comprises 2/3 of economic activity, rose by 1.8%, the slowest rate in three quarters.


At the halfway mark of earnings season, 2/3 of S&P 500 companies that have reported have beat their estimates. Solid reports from market leaders Apple, Tesla, and Amazon have helped. Earnings for the quarter are now expected to be down 0.3% from last year, versus the original -1% estimate. The 2020 estimate looks for a 9% gain. Of course, that will come down with time.


It has been 1,316 days since British voters decided to leave the EU, and here it is. The UK has now officially left the European Union. There is now an 11-month transition period where the two parties will try to reach some sort of deal.