Coronavirus – We’re All In This Together

Coronavirus – We’re All In This Together

 This weekend, six states now have a “shelter in place” mandate that orders all residents to stay at home unless for essential work, supplies and services, and health and safety matters.  Additionally, all non-essential businesses must close.  We expect (and hope) that other states follow suit as we fight to slow the spread of the pandemic.

Now that the coronavirus has reached the U.S. and has spread across it, the best action for the economy and the U.S. is to take temporary pain for the long-term good.  The coronavirus has surpassed anyone’s expected measures of infection in terms of its contagion rate.  In our talks with epidemiologists, the main goal of a virus is to survive, and it does this by infecting new hosts and reproducing.  If it’s too fatal, the virus naturally dies out.  If it isn’t resilient enough and the body can kill it effectively, the virus naturally dies out.  The coronavirus is, unfortunately, hitting a sweet spot in this zone and at this point, the best action to fight it is by limiting contagion.

 From our perspective, the market, like the rest of the U.S. has started to settle into this new reality.  During this new normal, we continue to look for signs that the government and the Federal Reserve are enacting measures to ensure that the economy continues to function as it should during this time.  To this extent, the Federal Reserve implemented a variety of programs this morning to ensure that liquidity will still be available by buying assets from banks allowing them the ability to then lend that money to businesses.  The Federal Reserve is also looking into measures to directly help small and mid-size companies.

 On the White House front, we are looking for news of what the “phase 3” coronavirus bill will contain.  This bill is expected to contain stimulus measures to help businesses survive this new normal of limited mobility and social distancing.  It is also expected to provide direct stimulus to U.S. families.  The bill did not pass through the Senate with Sunday night’s vote and is currently back to the Senate for further negotiations and revisions. 

 Additionally, we see the President signing the Defense Production Act as a positive for the market.  If an already approved drug such as hydroxychloroquine (previously used to treat malaria) proves effective in treating coronavirus, the President can order all pharmaceutical companies to produce the drug.  Additionally, if a new drug is discovered, approved and treats the disease effectively, the President can order the same.  This will drastically decrease the burden on hospitals, allow social distancing and travel restrictions to be lifted and reduced, and speed up the timeline of economic recovery.