Your Weekly Market Blip 3/20/20

Your Weekly Market Blip 3/20/20

Markets opened and gained 2.2% but then slowly faded into the close with the Dow off 913 at 19,173 on heavy trade as new virus cases in the US rise along with increased testing. BTS remains in cash and IBD shows markets in correction. Treasury prices were up as was gold while oil pulled back again after a spike on Thursday. For the week the Dow lost 17% which is the most since 2008. Shares of Clearwater Paper bolted higher today. Can you guess what product they make?
The bond market has become an interesting place this past week. Usually during a downturn money moves to high quality bonds for safety but now money is moving to short term cash regardless of quality. Last Thursday, after the Federal Reserve lowered rates and opened the discount window to support money market and cash instruments bond investors started taking gains and going to cash. This flight to cash has pushed investment grade and insured bond prices lower. Today the Federal Reserve launched a support system for banks and local governments to allow them to hold or use this quality paper as collateral if they need cash. Even BTS notes that for now cash is king but then on the back side of this there might be some good opportunities in the bond space.
Economist guru Brian Wesbury at First Trust updated his GDP forecast and now thinks Q1 will come it at negative 1.5%, Q2 at negative 20% and Q3 at positive 3% and continuing to rise from there. Brian thinks that in 2 to 4 weeks we will be at peak virus and then things will begin to improve. He bases this on Farr’s Law which states the rate and duration of an epidemic’s rise is mirrored by its fall. He also notes that so far 93% of those tested in the US have tested negative and that China, Japan and South Korea are clearly on the back side of the epidemic showing that the data is clearly counter to people blurting out on Yahoo Finance that millions could die. Right now we appear to be in a situation where there is not enough data to counter the uncertainty.

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