Rallying back from a drop of 40%, Wall Street continued its unfounded buying frenzy with major funds buying back depressed shares at bargain prices. But for the ordinary investor, can you really trust yesterday’s buying frenzy, rocketing the Dow Jones Industrial Average up 1,667 points or 7.7% to 22,540. While it’s welcome relief from the recent stock market rout that saw the Dow at 29,551 Feb. 5, drop all the recent low March 23 at 18,304 or 38%. Today’s rise to 22,888 at midday put the loss of its Feb. 12 peak to only 23% down from its record high. But for savvy investors digesting the effect of the coronavirus AKA CoV-2 or Covid-19 on the U.S. economy, it’s foolish to think Wall Street won’t test, and even dip below, it’s March 23 lows. There’s nothing to cheer about in the economy other than the possibility that SARS CoV-2 epidemic may be peaking in New York.
No economist, certainly not the ones working for the Federal Reserve Board, know how long current “shelter in place” orders will last, speculating about when the country could be back in business. Beyond that speculation, some think-tanks are prone to do like the Gates-funded University of Washington Institute for Health Metrics and Evaluation [IHME], no economist knows what the economy will look like in the near future Talk of restarting the economy happens daily in Trump’s daily coronavirus briefings but can’t say with any certainty whether that starts to happen after the April 30 national “shelter in place” order. Trump’s tired, along with millions of sports enthusiasts, of watching old reruns, because there’s nothing new happening under the nationwide “shelter in place” order. How differently that looks at the end of April is anyone’s guess, probably not too much.
Even if there’s a flattening of the SARS CoV-2 curve, that doesn’t mean the nation can get back to business as usual anytime soon, certainly not the kinds of crowds that goes to sporting events. Trump and his Corona Virus Task Force led by Vice President Mike Pence are kidding themselves thinking that if the government ends “shelter in place,” ordinary folks would jump back into their favorite restaurants, entertainment or sports activities. Not only are average consumers strapped for cash, they’ve been told by government medical authorities to maintain social distancing, whether or not “shelter in place” orders end at some point. Damage to the U.S. job market and the economy won’t snap back in some theoretical V-shaped cure, it will take years for the economy to recover. Bear market rallies happen in the pit of recessions, whether there’s any rationale or not.
Wall Street traders at the nation’s biggest private equity, hedge and mutual funds make money by driving markets up, then selling they off, then buying them back again. That’s the way Wall Street works, the opposite advice they give ordinary investors to buy-and-hold, ride out economic storms, not try to time the market. No, market-timing only works for Wall Street insiders. Martyring certain investors for so-called insider-trading, like Sen. Richard Burr (R-Va.) for selling $1.6 million of personal stock before the market crashed March 23 does nothing to stop Wall Street’s traders who have plenty of insider information before buying or selling. Whatever happens on Wall Street has little consequence to average investors, trying to figure out what to do in periods of extreme market volatility. One thing’s for sure, the U.S. economy won’t have an easy time bouncing back from coronavirus.
Life after the SARS CoV-2 epidemic won’t be the same with ordinary consumers driven to online-shopping like Amazon, no longer willing to rush to brick-and-mortar stores to do their shopping. While some will return to their normal routines, going to Target, Wallmart or other mass merchandisers, most consumers, accounting for 70% of U.S. Gross Domestic Product [GDP], will remain gun-shy. Getting consumers back to restaurants, bars, stores, movie theaters and sports venues won’t be easy because they’re use to staying at home. Reaching a plateau in new cases and deaths doesn’t mean states are out of the woods. How long the leveling off then decline takes is uncertain to forecasters like IHME, whose computer models have grossly overstated new cases and deaths in the coronavirus pandemic. That doesn’t mean that Wall Street rallies tell the public anything about what’s to come.
When Trump’s artificial April 30 deadline rolls around, the American consumer won’t snap back to all their past habits, running to restaurants, movies and sporting activities. Trump’s kidding himself to think that before the Nov. 4 election, the economy’s going to snap back. However the voters treat Trump in the economic recession is anyone’s guess. When you consider the nation’s polarized, the battered U.S. economy won’t help Trump’s reelection chances, no matter how he argues it’s not his fault. When unemployment hits record levels in coming weeks, Wall Street will once again go into sell-off mode, driving market averages to new lows. Wall Street wants to rally on a slowing of SAR CoV-2 but economists know that there’s going to be tough sledding ahead. Bear market rallies can’t change the fact that life after coronvirus won’t be the same for the economy.
