In Greek Myth, Hercules’ twelfth labor was to overcome and subdue Cerberus, the three-headed hound of Hades. This crisis also resists suppression and as noted, it certainly has three aspects: a market crisis, a health crisis, and an economic crisis. Recent weeks have brought no victories, but our collective Hercules can note some measure of progress. Consider:
Markets: The stock market, as measured by the Russell 3000 Index, has bounced nearly 30% from its March lows and now sits just 12% lower year to date. Other dips will come, but this is progress so far. While market volatility remains elevated, it has generally trended downward since 4/21. Two weeks ago, we wrote of another market, oil, after the May futures contract went berserk. Since then, the oil market has continued its repair as spot oil prices moved up from about $14/bbl then to about $24 now, the price of the June futures contract rose from about $17.50 to about $23.50, and the January 2021 contract remained steady at a bit over $30/bbl. Likely reflecting more adjustment to production than recovery in demand, it’s still welcome.
Health: The virus gives ground only slowly, but progress is evident. Yesterday, there were 2,230 identified deaths from the virus in the US. As unspeakably tragic as that is, it still represents a decline of 51% from the peak day for deaths, 4/16. More importantly, the 7-day average of daily deaths has now declined 34% from its peak on 4/21 and continues to trend in the right direction. Several companies have vaccines now in human trials and, if they work out, some companies expect emergency approval for high risk populations perhaps as early as October. Just last month, an eighteen-month timeframe was the earliest most projected.
Economy: The market crisis was the first expected to turn, followed by an inflection in the health crisis. But the economy can’t be expected to begin to improve until social stay at home orders are relaxed across the country and people return to work. As we know, that has yet to occur, but several states are beginning to open in slow stages, and over time, that should begin to slowly turn the economy toward recovery.
Of course, the Great Reopening has become politically divisive, with some crying “too quick!” and others, “too slow!” But with so many states and nations experimenting with opening in different ways, surely, we’ll collectively figure it out.
With markets a little less volatile in the past couple of weeks, this time we’ll allow ourselves to step back a little and make two broader observations: One is that we expect eventually markets will calm to the point that we don’t feel the need to send these updates weekly. Perhaps we’ll first go to every other week, then monthly, and ultimately revert to our traditional frequency of quarterly. We can hope. The other observation does not pertain directly to this crisis, but rather to what follows. Many expect (perhaps desire) this crisis will produce fundamental changes in many aspects of our lives and society. Others read the history of the 1918-19 Spanish Flu and conclude that in people’s minds and memory, it very quickly faded into history. We’ll see. But with respect to markets, we wonder if the seeds of the next crisis are not being sown in the policy remedies for this one. We have more than enough to deal with now, and we don’t need to worry now about problems that won’t be an issue for some time. So, we’ll revisit this topic later.
For now, we’ll be content to note the arrival of some meaningful progress in each of the three areas of the crisis. This progress is painfully slow. But the direction is encouraging, and that will have to be enough for now.