Is the tide turning? In my view, yesterday was the first day the headlines were not entirely apocalyptic. There was an element of rationality, something that has been missing for at least three weeks.

Regarding testing, according to newswires one million tests have been conducted in the US, a number that is expected to increase considerably each day. As the number of tests increase, so will the number of cases. What will not change however are the number of deaths. The percentage of deaths of infected people however will decline.

Speaking of deaths, I read numerous stories and saw various advertisements talking about who is at risk…the elderly especially those with pre-existing conditions. According to the CDC website, Friday 99% of people who have died in NY and Italy had either pulmonary or respiratory issues.

Italy reported yesterday that it reported the smallest number of new cases in almost two weeks. More importantly it was the largest percentage drop since the pandemic commenced. Percentage growth peaked about 10 days ago. Moreover, the World Health Organization stated the outbreak in Europe may be approaching a peak.

As widely discussed, Italy is about two weeks ahead of the US which is then suggesting there may be a light at the end of the proverbial tunnel.

More importantly, NY reported yesterday a rise in infections is slowing and the hospital discharge rate is increasing.

Regarding the markets, its generally accepted the Federal Reserve has thrown everything including the kitchen sink to combat the financial impact. Congress also acted passing the largest stimulus in history.

This fiscal and monetary policy has stemmed the immediate blood bath and has given a 6-8-week reprieve. Panic is receding.

What will be Act II. The patient is perhaps stabilizing, equivalent to stopping a bleeding heart with dirty hands on the battlefield. The patient is not yet in surgery but is in transfer to the operating room.

Will the patient have a historic recovery, defined as within 30-45 days be up and walking?

I naively think yes for the simplistic reason we are Americans. Rocky is metaphorically America…overcoming incredible odds and setbacks through hard work, determination, love of family and belief in a higher power.

Act III will be the more arduous and long lasting. What reforms will be enacted? As written many times I believe the seeds of this crisis was sowed in the response of the last crisis.

Liquidity and capitalization was sacrificed for speed and cost of execution. The Federal Reserve was forced to be the market maker of last resort to prevent the utter decimation of the financial system and the economy.

Regarding supply chains, supply chains have been shattered with many companies questioning the economic viability of global production and the just in time inventory process. Is multipolarity and interdependency dead, replaced by economic nationalism which will impact profit margins but may ensure the availability of supplies.

And then there are stock repurchase plans, funded by debt. Will such also meet an inglorious death with corporations creating a massive rainy day fund?

The number of possible outcomes is infinite. Perhaps the only accurate statement to write is that today is considerably different than yesterday.

What will happen today, the last day of March? Hopefully it will the end of an incredibly miserable era that produced the sharpest and quickest bear market (and perhaps economic implosion) in history.

Last night the foreign markets were mixed. London was up 0.65%, Paris down 0.10% and Frankfurt up 0.46%. China was up 0.11%, Japan down 0.88% and Hang Sang up 1.85%.

The Dow should open “nominally” unchanged, defined as 0.5% in either direction. The 10-year is up 12/32 to yield 0.70%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.