TodayBig swings in the crude market continue. Prices soared 25% yesterday and are up another 4.9% this morning. Funny how a 20% move from $20 just doesn’t seem so big after a 63% plunge in the first quarter. Trump says he’s made a deal, not according to OPEC+ but a virtual meeting is scheduled for Monday which is a positive step towards a resolution. Meanwhile demand has dropped by as much as 30 million barrels per day.
While oil is extending its gains, stocks are now just slightly lower to start the day. U.S. payroll data for March was released and the drop was massive but not reflect the extent of the current state, despite being the first decline since 2010. The survey data was collected as of March 12
th. In the two weeks that followed, initial jobless claims rose by nearly 10 million. Jobless claims remain one of the better high frequency data points we can use to monitor the impact on the jobs market.
On the virus front we’ve reached a rather grim milestone, cases topped 1 million yesterday and the U.S. will move past the quarter million mark itself at some point today. While gloomy, it rapid rise in U.S. cases is a good sign that testing has ramped up. Mike Pence noted they are testing 100,000 Americans each day. Deaths stand at 53,000 and governments continue to implement new restrictions on movement in an effort to contain the spread. France is expected to announce an extension of current measures. Spain and Italy appear to be seeing a decrease in active daily new cases, which is a postive. This inflection point in the rate of growth is an important first step and a sign that the drastic measures are beginning to take effect.
The bond market appears rather stable the past Bond market is stable, hovering at would be record low rates if we ignored the blowoff day in the bond market on March 9
th. Besides oil, most market volatility measures have subsided significantly over the past couple of weeks but remain in elevated territory.
One of the big questions for Canadian’s is what will happen with real estate prices? Resale activity got a little boost along with prices thanks to rates falling so low, but with social distancing measures nationwide new listings are expected to plummet. The effect of a self-induced recession is also unknown on prices. Demand will be lower, but so will supply. RBC expects there to be a
significant pullback in release activity, falling as much as 30%. Sale activity around Toronto was up 50% in the first two weeks in March, but fell 37% YoY during the last week. Why is it important? real estate, along with residential building construction, accounted for almost 15% of Canada’s output last year, ahead of energy at about 9%. Mortgage deferrals appear to be popular with 500,000 Canadians already deferring payments.
Here’s the latest
JP Morgan guide to the markets. It’s a quarterly release and should be a mandatory scroll for investors. The
Chart on page 26 outlines the industries most vulnerable to social distancing. No big surprises here: retailers, restaurants, entertainment, airlines and hotels. What is telling is these industries account for 19% of GDP and 20% of payroll.
Let the purge begin. S&P Dow Jones Indices has
dropped retailer Macy's from its S&P 500 listing as its capitalization has plunged to $1.5 billion from around $6 billion in February. Several retailers, including Kohl's, Nordstrom, Gap and Hanesbrands have similar market caps, as do a number of energy companies, and a senior analyst at S&P Dow Jones Indices has confirmed a purge is conceivable
Here’s a link from one of our favourite authors:
Investor Letter Memo from Howard Marks: Which Way Now? Diversion: Here’s a
virtual tech museum. The collection by Cooper Hewitt is sorted by date. From early calculators, to the first cell phones we’d bet if you go through this list you’ll recognize a dozen or so of these devices that were once so amazing that now seem terribly dated.