Dash to Trash -Market Update the Morning of 3/25/20
According to Bespoke Investment Group, the average stock in the bottom 10% performers since Feb. 19 shot up an average of 18%.
Airlines were one of the main benefactors of yesterdays rally. Some of the “safe haven” equities actually declined yesterday like Verizon, Costco and Clorox.
So how much is the stimulus really worth to the U.S. economy?
Tom Porcelli, chief U.S. economist at RBC Capital Markets, did some back-of-the-envelope calculations. The U.S. economy was running at a $21.5 trillion, or $413 billion per week, rate before the virus hits. Assuming the economy is 30% shut down, the $2 trillion probably gets you through 16 weeks, he said.
So whether markets have correctly priced the virus outbreak turns to the probabilities of how long it will be present. “Markets have to account for some probability that all outcomes are not bad outcomes. Unfortunately, in the current narrative, it seems we have a large left tail and only modest right tail in terms of the distribution,” he said.
Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer said from the floor that a deal was struck on the stimulus package. The bill includes provisions to extend bridge loans to companies, boost the duration and size of unemployment benefits and provide tax rebates, among other features
The eurozone, meanwhile, is considering ideas including using 2% of gross domestic product from its bailout out fund as a credit line, and issuing a so-called coronabond. European leaders are due to meet on Thursday.
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