Circus
Coronavirus worries dominated headlines but two other major events rocked the boat. First, the Fed announced an emergency 0.50% interest rate cut to provide support to the economy through coronavirus impacts. The last time the Fed did something like this was in the last recession, so while the actions may have been to support the business environment, it was reminiscent of unhappy times. Second, Super Tuesday proved to be a massive comeback for Joe Biden. After the events of the week, the last two standing in the Democratic race are Sanders and Biden. Given the moderate vote is no longer divided between multiple candidates, the market reacted well to the possibility of a moderate Democrat being on the ticket on November. But tbh, if Trump could find enough voters to come out and support him four years ago, there’s no telling what Bernie could manage to do this year.
Moral of the story: It was another volatile week for stocks, which started with a massive rally on Monday and reacted well to Biden’s success on Tuesday but ultimately ended the week lower as coronavirus cases began to spread across the US. As stocks continued to fall, yields continued to fall to record-low levels as investors tried to reduce risk. Things are still looking v chaotic.
Toxic
We were running in a contractionary manufacturing environment for the last six months of 2019 but saw signs of recovery in January after getting past the China trade war. That glimpse of hope dissipated again in February as the manufacturing sector fell back close to contractionary territory driven by the coronavirus. Most US manufacturers indicated business slowed in February because of supply bottlenecks as the coronavirus impacted their ability to get parts. The services sector, however, grew in February at the fastest pace in a year, but concerns over the coronavirus didn’t really impact this sector until the end of February when cases started appearing in the US, so the March data will be more informative.
Moral of the story: The numbers demonstrating economic damage from the coronavirus are just now starting to come through and it’s probable the situation gets much worse before it gets better. The Chinese manufacturing industry has effectively come to a standstill, which is impacting global supply chains. As companies start cancelling travel and events, the services sector – restaurants, hotels, leisure, retail – could see a much more profound impact in March.
Gasoline
The US economy created 273k new jobs in February, which is much stronger than the 165k increase that was expected by economists. Additionally, unemployment fell to a 3.5%, its 50-year low. On top of that, the jobs numbers for the last two months were revised higher by a total of 243k.
Moral of the story: Some of the biggest gains in February were in restaurants and bars but people start to really get scared of the coronavirus and minimize being part of crowded social gatherings as we’ve seen across Asia and Europe, these sectors could see pressure on employment. That being said, at least the employment picture looked good before the virus impacts – can’t imagine how grim the situation could be if we were in a weaker employment situation to start the year. Separately, I’m unsure how this turned into a Britney Spears edition, but her songs are oddly fitting to a viral environment.