Okay, the past week or so the stock market has returned from about 35% down to just about 17% down. So clearly the stock market (which is never wrong!) knows something that perhaps we don’t.
So what does all that “smart money” know?
Well it has been “said” or “known” by the guru’s that manage trillions of dollars for us “know nothings,” that the stock market bottoms out when a recession starts. While that does not sound “logical,” there is actually sound reasoning behind this homily.
The reasoning goes as follows: The stock market anticipates what is about to happen. So when this pandemic really started to gain traction, the market cratered. That’s because all that investable money “knew” that economic times were about to get bad and the stock market then “priced in” a recession even though the actual recession had not started yet.
When economic conditions started to actually deteriorate due to the fact that the entire U.S. economy has been shut down, and the economic indicators showed that the economy was contracting; it meant that a recession had begun.
Now the stock market is “anticipating” a recovery (how fast and how steep is not the issue at this moment) and has begun to recover.
Also, things are looking up from the medical point of view. Progress on both “testing” (for COVID-19 antibodies) as well as progress on an actual cure or prevention for the disease has been reported as making significant progress.
Just this week, two separate drug companies (including Pfizer) announced that they are aiming to have a COVID-19 medicine available for mass production by September. Now this medicine is to help some patients recover from the disease, not prevent people from becoming infected. But even having a “cure” such as this would be fantastic.
Because of this the stock market accelerated its recovery based largely on hearing this type of news from reputable drug companies.
Assuming all of this “good news” continues, and we actually start to see the light at the end of the tunnel, what might we expect?
Well first, it depends upon the governors of each state. About a half dozen, Georgia among the first, have begun to re-open businesses where social distancing will be practiced. That includes hair salons, tattoo-parlors, massage parlors, and body-piercing salons. Although how customers of these establishments can social distance from the service provider is a question in my mind.
Here in Washington State, Governor Inslee said golf courses will re-open on May 5th, subject to certain rules to keep disease transmission down.
Among these rules designed to avoid person to person transmission are:
a. No raking of sand traps – and removal of all rakes.
b. No taking out flag stick in each hole – perhaps also removal of the actual cup – so no one will reach down into it.
c. One person per golf cart.
d. No sharing/renting of clubs or balls.
e. No more than two players from separate households per tee time and social distancing must be observed even in the parking lot.
f. Maintain a log of all players including contact information.
Well, I can easily live with these rules.
Next, restaurants and other “close quarter” businesses. Just about every governor has stated that social distancing will be the rule in all these types of businesses.
Gyms, for example, will limit how many members can enter at one time.
Restaurants will keep patrons six feet apart. My guess is they will place caution tape over the tables in the middle of these spaces – or perhaps just remove the seats.
Of course, there is virtually no protection for service providers who work in these close quarter businesses. They will just have to take their chances so that the business can reopen.
But what should be clear is that business recovery will depend upon the confidence of consumers in their particular restaurants or other public businesses.
My prediction is it will be a cross-over between people’s desire to “get back out” versus their “fear” of becoming infected.
I think monitoring the daily spread (if any) of infections will determine just how quickly things “return to normal.”
I believe we can be in nearly full swing by late summer.