Weekly jobless claims were lower than anticipated…5.24 million versus the estimate of 5.5 million.  Moreover, much to the surprise of many, last week’s claims number of 6.6 million had no substantial revisions. In four weeks, the economy lost a staggering and incomprehensible 22 million jobs.

To put this number into perspective, more jobs have been lost in a month than created since 2001.  Wow!  This is unfathomable.

Never would I think I would ever write that I am relieved that there were only 5.245 million claims.

Many believe jobless claims—the instantaneous data point equivalent to hospital admissions—have topped out and the worst of the economic decline is over in the US.  Yes, the lagging data will deteriorate, but this is equivalent to coronavirus deaths…deaths are a lagging indicator of the disease.

I believe the economy has bottomed with one caveat…the economy must begin to reopen during the early days of May.   Government cannot continue to write checks. At some juncture there will be a breaking point.  Moreover, at some point government must acknowledge how much they are robbing from future generations.

If a reopening does not commence in several weeks—defined as a regionally–I will argue there will be lower lows as the odds of a total economic implosion increases exponentially.

Speaking of government, municipal finances are in shatters given the collapse in tax revenues.  The overly indebted states of NJ, NY, CT, MI, are facing considerable fiscal pressures.  It is not a question as to if they will cut benefits/services but the question is how much.  These issues will not be resolved overnight.

I think in 30-45 days society/economy will be facing an entirely different set of problems other than a fiscal crisis amongst some states.    I reiterate the odds of rising cost push (wage) and demand pull (product) inflation will rise if the economy does rebound by 25% as many are suggesting.

Then there is the national debt. The CBO announced actions to date has increased the budget gap by $1.6 trillion for FY 20.   How will the great surge impact interest rates?

Other issues at hand are supply channels.  There are ample stories of disruptions, partially the result of bureaucracy.   The problems are infinite.

How will history view today?  Will historians write government and the experts over reacted or will history be more conciliatory stating the cost of fighting the disease was worth it?

What I find incredible, Governor Cuomo stated yesterday that initial US projections from the CDC “were staggering with as many as 214 million people infected.” The CDC also initially projected as many as 2.2 million US deaths.   The country has a population of 328 million.

Total US cases to date are about 650,000 or about 0.30% of original estimates.  [Note:  As per the March 12 CDC report, the initial range was from 160 million to 214 million cases]

Wow!  Commenting cynically, I don’t think social distancing has prevented this many cases.  With this written, however I do believe there are more than 650,000 cases in the US, many of which are undiagnosed given the lack or severity of symptoms.

Science is based on assumptions and changing those assumptions as data is discovered.  It is evident by the huge miss in the actual outcome, the initial assumptions were made on incomplete or inaccurate data.  As noted earlier, how will history view this massive aberration?

Perhaps the only certainty to write is today and tomorrow will be different than yesterday.

Commenting about yesterday’s market action, some were dismayed by New York decision to extend the lockdown for another two weeks until May 15.

Last night the foreign markets were up.   London was up 3.35%,  Paris up 4.18% and Frankfurt up 3.99%.  China was up 0.66%, Japan up 3.15%  and Hang Sang up 1.56%.

The Dow should open moderately higher on reopening plans and optimism of a pharmaceutical to combat the virus.    The 10-year is unchanged at a 0.63 yield.


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.