What a pleasant surprise.
A large dose of good short term news this week has pushed the markets up nearly 12%, clearly extending the Relief Rally we mused we had seen in the few short sessions 2 weeks ago. News of cresting virus cases in hard hit areas such as New York and our own state of Washington among others helped considerably. In addition, a potential oil production cut worldwide seems to have been agreed upon in theory. This will help on the margin as oil demand has plummeted and production has far outpaced places to store the excess. Add to that the Fed going “All In” in it’s commitment to do whatever it takes to stabilize capital markets and it is no wonder we are seeing stock markets rallying back, erasing nearly 50% of their losses.
So is everything ok, will we be re-opening for business in May or June and the economy begin its roar back to normalcy? Hard to imagine. While all the above is good, no, great news, it does not erase the economic “time” lost forever. The US government has pulled together it’s significant resources to fill this gap for now. That cost will be added to the Federal debt and dealt with (and worried about) at a later date. In addition to that, it’s still unclear to us how a return to normalcy will actually unfold. How long will it be before we can truly claim victory over the insidious virus and put this in the rearview mirror for good? That may take time, and time is money to the economy.
While we believe the steps being taken are constructive and necessary, it leaves us unsure how the back side of this crisis looks. We still believe we have some disappointment retest coming and will be patient to recommit net dollars to the markets. If we are wrong and it is all over and off to the races, we will be happy to have most of our portfolios invested to participate.
Stay tuned, there is much more to come.