FREE ACCESS April 15, 2020

MorningWord 4/15/20: Uncertain Death… and Taxes

by Dan

Pre-Coronavirus, April 15th in America was a sort of dreaded day, a mad rush to get your taxes filed… with no shortage of snarky repeatings of the phrase… “the only certainty in life… is death… and taxes”.  Well, on Tax Day 2020, both life and taxes appear to be anything but certain. Last month the powers that be (which is being hotly debated this week, in a sort of not cool or hip-hop rehash of the Federalist papers) instituted Shelter in Place orders, and the U.S. Treasury postponed Tax Day three months. Tens (if not hundreds) of millions of Americans are not leaving their homes for fear of contracting and further spreading a virus that can be far more lethal than the Flu. While the death toll has been contained by extreme mitigation tactics to date (26,000 in the U.S. vs 600,000 confirmed cases), it is important to note that we have yet to test 1% of our population, and there appear to be significant bottlenecks to mass testing.

It seems that the national dialogue, which seems fairly well divided by party lines has moved on from how lethal the virus is, towards how much more damage will be done if the U.S. economy (and to lives and livelihoods) remains on lockdown for too much longer. As I have said on many occasions in this space an on CNBC, I am sympathetic to that argument, but reopening needs to be done thoughtfully, with the care of science and specifically armed with the knowledge of who had, has, is predisposed and is immune to the virus. Another wave, followed by another lockdown later in the year could be a knockout punch for the economy that is most certainly in a recession, despite it being a self-induced recession.

I’ll reiterate what I have been saying about the stock market though, it is the wrong lens to be looking at the progress on the two most crucial crises we are facing, the health and economic ones. The stock market’s plunge last month was a crisis for holders of stocks, and yeah the negative wealth effect from such a plunge can put a dent in consumer confidence, but the Fed was Jonny on the Spot to plug that hole.

But if the stock market is your kaleidoscope (as it appears to be trump’s) in measuring the progress on the health and economic front, then consider the lunacy of the worst health threat to the world’s population in a century, the largest drop in the stock market measured by time in a century, the largest spike in unemployment in our country in a century, the largest drop in consumer confidence ever… that all of this will be done and dusted, like a miracle, it will all just go away after a two month, 35% peak to trough decline in the stock market???  The economy is most certainly in a recession, now it is just a matter of how deep, and for how long.

When you consider all of the uncertainty that remains, and the deficiency of obtaining the one data point that matters most to reopening the economy, mass testing, while scientists race to develop therapeutics which will take the pressure off of our hero frontline workers in hospitals, and hopefully working towards vaccines that will give citizens the confidence to leave their homes, go back to work, spend, and corporations to reopen, rehire and spend on the things that will get the economy going again. Testing needs to ramp, and quickly.

As for the stock market, I’ll stick to my guns, this is not the end, the bottom is not in, despite sentiment on Wall Street changing towards the stock market, it is being ruled by uncertainty, and progress on the testing front, and time will allow for greater clarity on the economic outcomes which will allow the stock market to find a bottom and set the stage for another bull run, but I can’t fathom a reality where we are anywhere near that certainty.

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