The headlines are absolutely apocalyptic, drowning out the more rational comments. NJ announced yesterday the rate of virus increases is diminishing. NY commented the percentage rise in infections is slowing. Italy, the world’s deadliest, the epidemic “is slowing appreciable” after a three-week lockdown.

Newswires have ignored statistics such as according to the CDC 99.2% of US deaths the patient had pre-existing conditions. For example, 74.8% had renal disease, 61% had cardiovascular disease and 50% were former smokers.

Everyday the proverbial model will change as more data becomes available. This data is instrumental to making informed decisions, decisions based upon repeatable scientific evidence that will challenge and change assumptions.

Equities traded lower on the headlines. However, in my view yesterday’s decline was more rational and quieter than previous. Some are opining the March 23 lows will be tested. No one knows.

On April 6 the Treasury will begin trading in corporate and municipal debt. While I abhor government intervention, such is needed to prevent the liquidity crisis from morphing into a solvency crisis. Similar to the ending of mark to market accounting in March 2009, the event that ended that decline, I believe there is a distinct possibility once trading commences, this could mark a proverbial bottom of today’s crisis but with one caveat.

Society and business begin to reopen in 4-5 weeks. If the timing is similar to that of South Korea and Japan, 30 days from now the virus landscape should change radically thus permitting a reopening.

Speaking of the economy, everyone dismissed yesterday’s data which was stronger than expected in almost every dimension. I am certain the statistics will massively deteriorate in the coming weeks.

Speaking of data, initial jobless claims are released at 8:30. Analysts are expecting anywhere from 800,000 million to 6.5 million claims. The median increase is 3.6 million, slightly higher than last week’s number. Wow!

Today is unprecedented. Never in history has the global economy been struck by an international disaster. No model or valuation model has been created to measure the response to such. The sudden stop and the length of this stop is driven by medical issues not economic or financial.

The upcoming changes are infinite with perhaps the most obvious is one of a greater reliance on resilience rather than efficiency and the acceleration of the de-globalization trend.

There is no interest like self-interest where economic nationalism trumps multiculturalism and interdependency.

What will happen today?

Last night the foreign markets were up. London was up 0.60%, Paris up 0.91% and Frankfurt up 0.29%. China was up 1.69%, Japan down 1.37% and Hang Sang up 0.84%.

The Dow should open nominally higher, defined as 1% to 2% higher. Oil is surging, up about 12% on news that China will boost its reserves. The 10-year is off 4/32 to yield 0.60%.


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.