The good news
The good news is, the US House passed a third set of virus relief measures aimed at bolstering the world’s largest economy in the face of what is widely expected to be the steepest downturn since the Great Depression.
The $2 trillion aid package, finalized and passed by the Senate earlier this week, is unprecedented in size and scope. It was sent to Trump’s desk on Friday afternoon. He immediately signed it.
“Our nation faces an economic and health emergency of historic proportions”, Nancy Pelosi said. “We do know that we must do more”.
“We are going to help Americans through this”, minority leader Kevin McCarthy promised. “We are going to do this together”.
US equities fell sharply Friday, but finished the week up some 10%, the best week since 2009. It’s a welcome reprieve from the worst stretch since the financial crisis (and some of the worst single sessions in the nation’s history), but you should note that trying to divine anything from the price action in equities right now is an exercise in abject futility.
This week’s big story was the dollar, which fell the most in a decade. You can (and should) read more on that here, but it’s good news.
Gold had its best week since 2008, and what a week it was. Shiny, yellow paperweights grabbed all manner of headlines amid currency debasement worries tied to monetary stimulus and fiscal largesse and talk of a historic squeeze, which appears to have not panned out – or at least not dramatically, based on contract rolls.
In another notable factoid, Bloomberg’s Luke Kawa writes that a pure value US factor portfolio had its best week “since at least the dawn of the new millennium”. A retail product (VLUE) had its best week since inception.
The S&P is still some 25% off its record highs, and the VIX closed above 60 for the 10th session.
As noted first thing Friday morning, the share of S&P 500 constituents trading above their 200-DMA is at a crisis-era nadir.
Still, traders will take what they can get these days. Ultimately, the Dow had its best week since 1938.
The bad news
The bad news is… pretty much everything else.
The clearing of the final legislative hurdle for the largest stimulus package in US history comes on a day when Americans are grappling with the grim reality of the United States having overtaken China as the country with the most confirmed coronavirus cases.
New York – which has more cases than Iran – is facing a full-blown crisis. Trump spent a good part of Friday berating General Motors and Ford. Suffice to say the president wants ventilators, and if he doesn’t get them in a hurry, well then, some folks are going to have “trouble” going forward.
“General Motors MUST immediately open their stupidly abandoned Lordstown plant in Ohio, or some other plant, and START MAKING VENTILATORS, NOW!!!!!!”, the president shrieked, in a tweet. “FORD, GET GOING ON VENTILATORS, FAST!!!!!!” (And yes, every, single one of those exclamation points is in the original tweet.
(For what it’s worth, GM doesn’t even own the Lordstown plant anymore.)
About an hour later, GM put out a press release. To wit:
Bothell, Wash. — Ventec Life Systems announced today General Motors will build VOCSN critical care ventilators at GM’s Kokomo, Indiana manufacturing facility with FDA-cleared ventilators scheduled to ship as soon as next month. This effort is in addition to Ventec taking aggressive steps to ramp up production at their manufacturing facility in Bothell, Washington.
Across all manufacturers, there is a global backorder of critical care ventilators capable of supporting patients fighting COVID-19. The companies are adding thousands of units of new capacity with a significantly expanded supply chain capable of supporting high volume production. GM is contributing its resources at cost.
GM will also begin manufacturing FDA-cleared Level 1 surgical masks at its Warren, Michigan manufacturing facility. Production will begin next week and within two weeks ramp up to 50,000 masks per day, with the potential to increase to 100,000 per day.
Ventec and GM are working around the clock to meet the urgent need for more ventilators. Efforts to set up tooling and manufacturing capacity at the GM Kokomo facility are already underway to produce Ventec’s critical care ventilator, VOCSN. Depending on the needs of the federal government, Ventec and GM are poised to deliver the first ventilators next month and ramp up to a manufacturing capacity of more than 10,000 critical care ventilators per month with the infrastructure and capability to scale further.
Mary Barra, with whom Trump has famously clashed, said she’s “proud to stand with other American companies and skilled employees to meet the needs of this global pandemic”. She also said the company has “moved mountains” to find a solution that saves lives.
Just before lunchtime Friday, Trump essentially threatened to take the company over. “As usual with ‘this’ General Motors, things just never seem to work out”, he seethed. “Always a mess with Mary B. Invoke ‘P”'”.
After the bell, the president instructed the HHS secretary to “use any and all authority available under the Defense Production Act to require General Motors to accept, perform, and prioritize contracts or orders for the number of ventilators that the Secretary determines to be appropriate”.
“GM was wasting time”, Trump declared, in the official press release.
Apparently, this isn’t actually GM’s fault. “GM was growing exasperated with the Trump administration because it had done the work to secure suppliers for the 700 components needed to make ventilators [and] had even started hiring [more] staff in Kokomo”, Bloomberg said, citing a person familiar with the situation. “But the companies were waiting on the federal government to decide how many machines it will need, how many producers it will hire and, by extension, how much it will pay Ventec”.
For its part, Ford’s vice president of communications, Mark Truby, said the company is “pulling out all the stops” and “working flat-out” with GE Healthcare to make simplified ventilators.
Meanwhile, people are dying. Lots of them, actually.
In the wake of Spain’s deadliest day of the crisis, Italy said 964 people died in the last 24 hours. That’s the worst day yet for the country, where the death toll continues to mount despite a total nationwide lockdown.
Italy and Spain account for the majority of the fatalities globally.
It is not a stretch to call this a dire emergency for Europe, although, mercifully, the number of new cases in Italy fell Friday to 5,959, down from 6,153 the previous day.
By Friday evening, when Trump signed the latest virus relief bill and held another press conference, the global infection total from the virus was approaching 600,000.
In a sign of the surreal times in which we live (and trade), Trump praised both John Kerry and Rachel Maddow on Twitter Friday, the former for having a good sense of humor, and the latter for highlighting the efforts of the military.
Finally, when thinking about markets in the context of the current crisis, try to keep some perspective…
when people compare pandemics to war I’m pretty sure they’re referencing the need for social cooperation and central command of resources, not your arb trade blowing up, sry guys https://t.co/0dJR90nYsj
— alexandra scaggs (@alexandrascaggs) March 27, 2020
Welcome to the Orange New Deal. Yeesh, good thing we didn’t elect a socialist who would tell U.S. businesses how to spend their money, amirite?
The level of greed on Wall Street never ceases to amaze me. This is an existential crisis the likes of which we haven’t seen in generations. It’s way more serious than the collapse of LTM, the Thai baht crisis, the bursting of the dot-com bubble, 9/11, or the subprime mortgage clusterf*ck. The choice is stark: plunge the economy into depression or let one or two million people die. And yet all you hear from the chuckleheads on Wall Street and CNBC is, “Now is a good time to buy.” #idjits