More than $8 trillion has been wiped from the S&P 500 since February 19th. As we wait for the biotech industry to produce an antiviral and a vaccine, it is going to take the sacrificing of freedoms to keep at-risk Americans safe.
This was a horrific week for the equity markets, there is no sugar coating. March has been the worst month for the Dow Jones since September 1931, as the index lost -24% as of Friday. Fundamental analysis on stocks in this current environment is not useful as equities are in full liquidation mode. What we are witnessing is forced deleveraging from equities. Many of the bigger market participants are leveraged, and when markets lose a third of its value in a month, those caught on the wrong side are forced to sell anything they can, at any price. These forced liquidations, panic, and the need for investors to sell to cover living expenses for the foreseeable future have created opportunities for savvy investors with cash on the sidelines. These opportunities may get even bigger over the next few weeks as we will get our first look at layoffs due to the virus. This coming Thursday morning we have unemployment claims which is estimated to be the highest number in history as businesses around the country have closed down sending all employees home.
We are at war with a virus. As a cancer survivor with a compromised immune system, I followed the Coronavirus in extreme detail when it first was announced in China out of concern it would spread to other countries. I watched cell phone videos on Twitter of government workers welding the doors shut to apartment complexes so that no one could go outside. I watched an infected couple be put into a steel box on the back of a pickup truck to be transported to a hospital. Everyone in China wore N95 masks in public, everyone. With life in China now returning to normal after their extreme actions to contain the virus, I am concerned about the discipline of the American public. We are the land of the free and no one wants to sacrifice their freedoms. I continue to see Spring Break videos of college students partying and long lines at grocery stores with 1% of the people wearing masks. I am sure some try to go about everyday life like this is no big deal, continuing to have large social gatherings. It is going to be very difficult to stop the spread of this virus without sacrificing freedoms for a short period of time and being smart with all interactions outside your home.
For those of you that did not see Bill Ackman’s CNBC interview, I think he nailed it. I am including a link and recommend that you watch. We must be more disciplined as a country to conquer this virus. All we need to do is stay home, everyone. Something so simple, yet so difficult to get everyone on the same page. My gut is that the drastic actions being taken now, with 80 million Americans being told to stay at home, is to buy time for the biotech industry to come up with an antiviral and a vaccine. I have full confidence that they will be successful. Unfortunately, this will take time. For the stock market and economy to recover, we need to see the virus spread diminishing. The easiest way to do this is to just stay home, and if you must go out, wear a mask and latex gloves. I became a Kindergarten teacher this week… Let's be smart about our actions so that we can eventually get our youth back to school and start building back our economy.