March 13, 2020

No other way to frame it, that last several days have just been brutal for investors.  During yesterday’s wild trading session, the Dow Jones Industrial Average (DJIA) dropped by just under 10%, in what was the largest single-day percentage decline since the stock market crash in 1987.

Investors shrugged off news that the Federal Reserve was stepping in to offer nearly $1.5 trillion in emergency relief, as well as President Trump’s address to the nation, to outline the government's continued response to the novel coronavirus outbreak.

It's possible that investors continued their selling streak yesterday, because any short-term gains from the Federal Reserve's efforts to reverse the slide, may not be able to bolster the short-term health of the American population. However, the Federal Reserve’s efforts may be monumental in helping the U.S economy rebound once the virus is better understood and contained.

Or it could be the economic uncertainty as more American institutions are being disrupted by efforts to mitigate the spread of the novel coronavirus sweeping the country. From local schools and universities shutting down, airlines, restaurants, and even major sports events have been cancelled and entire seasons are being put on hold.

It's against that backdrop, that investors took to the hills yet again yesterday, and all this ahead of the country being ready to truly ramp up its COVID-19 testing.

In short, despite the Federal Reserve’s efforts and President Trump’s comments, investors haven’t seen enough nor heard enough - and the markets reflect that – as do current valuations.

So, what do investors need to hear?

Obviously, we would all love to hear that a cure or a vaccine was imminent. Unfortunately, we do not expect either in the coming weeks or months, although we are confident at some point we will.

So, what else do investors need to hear…  I believe some combination of the following:

1. Most Importantly - evidence of a successful virus containment here and abroad, greater insight in regard to when proper testing in the US will be available on a more meaningful level; and a deeper understanding of the virus itself (what is myth and what is reality).

2. Clarity on the net economic impact to the economy; more details regarding the Fed’s allocation and implementation of its emergency plan. Who, how and when – not just how much?

3. With the announcement of the cancellations of flights out of Europe to the United States, the President admitted to the seriousness of the virus, but he failed to offer a Plan to offset the economic impact. The President needs to not only have a current and contingent economic/stimulus plan – it needs to be articulated to the American people. 

4. A concerted global policy response both from a healthcare and economic standpoint, we need leadership here and abroad, and it needs to be united. It is at times like this, that we need to consolidate resources, share research and extend a helping hand, but above all, the world needs confidence in their leaders. They need to believe these nations will do whatever it takes to protect its citizens and their financial well-being.

In conclusion, we need leadership, we need some good news for a change on the virus front, and we need our Federal Reserve and the Administration to be all-in on financial relief to those most economically vulnerable. Save the second guessing for later. We are going to need the stimulus regardless.

That being said, keep in mind that the financial markets typically bottom well before the bad news turns completely positive. Fantastic companies have seen their stock prices indiscriminately crushed by the current market panic. I remain resolute in the resilience of American businesses, the long-term strength of the American economy and perseverance of the American worker. This too shall pass.