The First Quarter of the 2020 Financial Markets

It was an awful quarter for the financial markets, but, of course, that’s less important than the toll that the coronavirus has taken on lives worldwide. The S&P 500, the bellwether for U.S. stocks, was -20%, although it had been -35% from its high on February 19 to its low on March 23. History-making stuff. Unfortunately, it looks like near indiscriminate selling has returned at the beginning of the June quarter.

The market is a discounting mechanism. Securities prices immediately reflect the knowns. I think that U.S. stocks are priced for horrific coronavirus losses over the next few weeks. President Trump and his medical advisers even have mentioned the potential loss of 240,000 American lives. God help us. Although that’s a scary figure, particularly since the coronavirus “only” has killed about 44,000 globally thus far, it’s now public data that has been absorbed by the market. In my view, a durable recovery – fits, and starts don’t count — in stocks won’t happen until we’ve seen peak coronavirus pain. I pray that that’s in April more so for the sake of humanity than for the catalyst for the next bull market.

Like you, I’ll be following the coronavirus reports for that peak so that we all can see the other side. Perhaps unlike you folks who aren’t investment nerds, however, I’ll also be reading about and listening to everything that corporate America has to say about current business conditions and for what they see for the rest of 2020. Stocks can’t meaningfully and consistently rally until earnings expectations are slashed to fully reflect coronavirus reality. These “confessions” should come in late April through early May, so stay tuned.

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