Financial Economics With The Epidemic's End In Sight
Published Friday, April 24, 2020, 7 p.m. EST
- If the economy won't begin to return to normalcy until the public health crisis ends, this chart, used with permission from the Institute of Health Metrics and Evaluation (IHME), shows the beginning of the end of the Coronavirus financial crisis is expected to occur in June.
The projection is from the Institute of Health Metrics and Evaluation, an independent public health research center at the University of Washington. IHME is backed by the Bill and Melinda Gates Foundation and its statistical model is often referenced in daily press conferences with officials from the White House Coronavirus Task Force.
The peak in deaths per day occurred on April 15 and IHME's grim projection shows the daily deaths will continue at a declining until the daily death toll ends the Coronavirus epidemic of 2020:
For investors, especially those depending on their portfolio for retirement income, the plunge in stocks has been frightful, but the forecast from public health experts is that the epidemic will indeed end.
That is the statistic that matters most to investors for the long run.
The partial shutdown of the economy is vividly illustrated in these four charts with the latest fundamentals.
Economic activity has plunged. It's wise to expect current conditions to persist for two or three months.
The business owner optimism index (upper left) experienced its biggest one-month drop since its inception in 1986. The rate of unemployment is expected to rise in April and May, perhaps to 10% or 12% compared to the 4.4% rate at the end of March.
Retail sales have cratered. They are likely to remain flat April, May and June. The Conference Board's Leading Economic Index (LEI) in the lower right chart shows the setback puts the LEI back to the level in 2017.
The Coronavirus bear market low on the Standard & Poor's 500 index was 2237.39 on March 23, 2020. Today, the S&P 500 closed at 2,836.74, down 1.3% from last week. A week earlier, the index of U.S. strength gained 3%, which followed a spectacular 11.4% one-week gain -- the best one-week gain since 1974.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
This article was written by a professional financial journalist for KDM Investment Management Inc and is not intended as legal or investment advice.