Markets can deal with bad news but not with uncertainty. As we get a clearer picture, we’ll see how much has already been discounted by the market.
By Quincy Krosby, Chief Market Strategist, Prudential
- The Fed is all in on keeping the economy solvent and markets functioning
- The fiscal relief package will help cushion the economy during the shutdown
- Markets remain vulnerable to headlines
Coming into the second quarter, the economic data releases are beginning to show how quickly and forcefully we have transitioned from “a good place” in terms of the economy and monetary policy, as characterized by Chairman of the Federal Reserve Jerome Powell, into the surreal world of a global economic shutdown. This is a world now characterized by daily counts of novel coronavirus COVID-19 cases and deaths, both here in the United States and around the world. This is a world in which the data are sliding quickly, erasing the remnants of what was a strong housing market, manufacturing that was finally beginning to expand, the lowest levels of unemployment in decades, and consumer optimism that suggested a healthy backdrop for the second quarter.
This is a world with huge daily swings in the stock market, which had—despite debates regarding valuation—recently reflected optimism, reaching new highs even as the virus began its migration out of China.
The closing down of the economy, as governments on the federal and state levels attempt to contain the spread of COVID-19, has led to broad and intense discussion of whether the measures are too draconian, and whether restrictions should be lifted sooner rather than later for the sake of the health of the overall economy. The issue of individual rights has also become an integral part of the national discussion as state after state invokes containment policies. To be sure, as the data unfold, particularly with unemployment rising to levels we haven’t seen since the 2008-2009 financial crisis, the debate will intensify.
Read Quincy’s full Q2 April 2020 market commentary, “Whatever it takes.”
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