Suburban elites, Range Rovers and toilet paper

Slowly, selectively, and deliberately, some states and businesses will begin to reopen this week on a limited basis as indications emerge that we may have passed the peak of the Covid-19 pandemic here in the United States. Any reopening, limited or otherwise, will reflect a change in life in a world permanently altered by the impact of COVID-19. Social distancing, face masks, an abundance of hand sanitizers and dispensers, and a long list of COVID-19 inspired dos and don’ts will now be commonly socially accepted – dare I say universally demanded. Every aspect of daily life will be defined by COVID-19 for the foreseeable future.

Additionally, more testing and tracking will certainly follow in the days, weeks, months, and years ahead. As the Johns Hopkins Coronavirus Resource Center website below indicates: here in the United States, well over 5 million people have been tested for the virus. The pace of testing continues to accelerate as well. Testing is a requirement for any ambition to return to relatively normal markets – much less society. The debate between reopening and remaining closed has and will continue to pit political foes and economic interests against one another. If anything, and as nearly impossible as it may seem, this COVID-19 pandemic has seemingly heightened the differences and divisions in Washington though it appears as though on Main Street, everyday Americans appear to be reaching across the political and economic divide to make life more manageable and reflective of our shared American spirit and bond.

The Scab & the Wound Beneath is a well-written and thought-provoking article by Victor Davis Hanson in the May issue of the New Criterion that speaks to the societal divide I referenced. The article also speaks to a historical precedent for where we find ourselves. It is a cautionary tale to be certain.

The quote below is the introductory paragraph of the article:“An overriding theme of the historian Thucydides’ monumental history of the Peloponnesian War (431–404 B.C.) is the fragility of civilization. In extremis, when both the elites and masses lose their thin veneer of culture, society can turn feral quickly. During a horrific war, plague, or revolution, even a wealthy and sophisticated civilization such as that of the classical Greek city-states regresses in a second to its innate state. And what follows from these natural and man-made disasters is not pretty. Still, these calamities can be tragically instructional. Hypocrisies arise. Pretexts vanish. Fundamental but forgotten truths, easily masked in times of calm, reemerge. From Thucydides’ warnings, we can glean that even suburban elites in Range Rovers can in a day be reduced to tugging over toilet paper rolls at Whole Foods.”


As expected, US equity markets managed to move largely sideways last week with a degree of renewed volatility – at least as we got underway on Monday and Tuesday. However, markets did close on a decidedly positive note on Friday. The sideways action that materialized last week was a function of investors continuing to digest the sharp rally that has taken markets significantly higher from the lows registered on March 23rd – as we discussed last week. The broadly horizontal and choppy price action that was evidenced by last week’s trade was given meaningful support by the Nasdaq – specifically the tech sector.


On Friday all four major market indices posted solid gains. The S&P 500 added 1.4% while the Nasdaq Composite and Russell gained 1.6%. The Dow Industrials underperformed on a relative basis adding 1.1%. Volume on both the Nasdaq Composite and New York Stock Exchange slipped heading into the weekend.

Nasdaq Composite members Apple and Amazon will be reporting this week. As the Nasdaq earnings calendar below indicates, this is one of the busiest and most important weeks of this earnings season. Thus far this Q1 earnings season, financials have not disrupted the COVID-19 rally. Large-cap tech stocks have not only not sidetracked the rally, they have added momentum to our trade higher as evidenced last week. In part, that momentum was also fueled by the historic snapback rally that took shape in crude oil markets – lifting the S&P energy sector in its wake. Last week’s rally into the weekend leaves markets in relatively stable shape this morning as we move deeper into Q1 earnings season.

This week’s economic calendar highlights:

The FOMC meeting begins on Tuesday. With rates at or close to zero, investors will be paying particularly close attention to how the Fed will be tackling the global economic slowdown – with expectations that rates on U.S. Treasuries may dip into the negative yield territory for the first time in history in coming quarters. Also on Tuesday morning, the international trade in goods data for March is released. Econoday consensus is $-51.5 B versus February’s $-59.9 B reading. Imports are expected to contract by 2.6 % while exports are expected to inch higher by 0.5%. The Conference Board’s consumer confidence reading for April, scheduled for release at 10:00 am Tuesday, is expected to reflect a sea change in consumer outlook in a matter of one month. March’s reading was 120.0. April’s reading is expected to be 95.0.

On Wednesday, other than the FOMC meeting announcement and Fed press conference, the IEA Petroleum Status Report for the week ending 4/24 is released. Keep in mind that the previous week’s inventory report reflected a significant build across two verticals in particular: crude inventories rose 15.0 M barrels and distillate inventories rose 7.9 M barrels.

Weekly jobless claims for the week ending 4/25 are released at 8:30 am. More than any other data point thus far in this pandemic induced economic lockdown, weekly jobless claims have been illustrative of the magnitude of the challenge we face as we move forward. This report is expected to reflect another historic weekly jump in claims. Econoday consensus is 3,500 K. The four-week moving average stands at 5,787 K. Personal income and outlays for March are due out Thursday morning as well. M/M, personal income is expected to contract by 1.1%. Not unexpectedly, spending is expected to contract by 4.2%. The ISM Mfg. Index for April (c. 39.0) is due out Friday morning. March’s reading was 39.0.

Flickr photo: Robert Couse-Baker

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