April, 2020

The past week got off to a positive start, with the major indexes recording their first Monday gains in four weeks. The upswing continued into Tuesday morning, helped by a tweet from President Trump calling for a “phase four” round of stimulus based on a $2 trillion infrastructure bill. Democratic leaders appeared receptive to the idea, though some Republicans stated that new spending initiatives should wait until recently passed legislation is implemented and areas of economic need become clearer. Better-than-expected economic data out of China also seemed to bolster sentiment. Deepening worries about the severity and duration of the coronavirus pandemic soon sent stocks back lower, however. Stocks then fell sharply on Wednesday morning, as investors reacted to the previous evening’s White House briefing, where officials warned of the possibility of up to 240,000 deaths in the U.S., even with mitigation efforts in place. Stocks recovered some momentum on Thursday, helped by the rebound in oil prices, but fell back as the week’s economic data reflected the deepening imprint of the coronavirus crisis, particularly on the labor market. Jobless claims roughly doubled from the previous week, with over 6.6 million Americans applying for benefits, well above even pessimistic consensus expectations. Nonfarm payrolls, reported Friday morning by the Labor Department, fell by 701,000 in March, about seven times worse than consensus. The decline brought an end to a record stretch of 113 consecutive months of job growth and lifted the unemployment rate to 4.4%, its highest level since 2017. Friday’s bleak jobs data may have been compensated for somewhat by the Institute for Supply Management’s index of nonmanufacturing activity, which showed continued expansion in March, defying widespread expectations for a sharp contraction. For the week, the Dow tumbled 2.7%, the S&P fell 2.1%, our 50/50 Nasdaq/Russell benchmark slumped 4.4%, European bourses were all negative but diverging (i.e. FTSE -1.7%, CAC 40 -4.5%, and the DAX -1.1%), and Asia Pacific stock markets all down (India -7.5% and Hong Kong -1.1%). Your BSD Global Tech Hedge Fund slipped 0.7%.

The market could drift lower in the week ahead, as investors watch developments around the coronavirus and wait for first quarter earnings season to begin. Jobless claims are expected to show many millions more in layoffs in the coming week, and the markets will get a look at investor sentiment. But the biggest issue for the markets is the progress of the virus and when the protective shutdowns will end, allowing the economy to recover from its sudden paralysis. Oil could be a factor in the week ahead as Saudi Arabia and Russia seem to be dithering and postponed an emergency meeting Monday to discuss production cuts. On Sunday, Trump extended the guidelines on social distancing to April 30, as the number of cases grew. No great surprise, but jobs are going to be a major focus again next week; economists are forecasting another 7M unemployment claims are coming down next week. Other economic reports of note include the JOLTS update and a check on consumer prices, while the FOMC will drop the minutes from its latest meeting to the delight of Fed watchers. Your BSD portfolio management and research team has the downside risks of our stock portfolio under control, and our hedging program can continue to contribute alpha in a deteriorating market. Once the negative momentum has subsided, your BSD team is eager to invest our recent profits across a valuable shopping list of tech vendors and tech end-users.