May 22, 2020 - Stocks posted gains this week, although most of the gains happened Monday with the rest of the week marked by uneven sessions that saw intra-day reversals of fortune in either direction.
News of possible breakthroughs on vaccines and treatments remain the biggest cause of volatility to the upside, with some positive results from a not-yet-completed trial from Moderna (MRNA) helping to kick off Monday's rally.
We're also starting to get glimpses of how reopening is going as parts of the country lift stay-at-home orders. While anecdotal media reports tend to highlight crowds in places where they have appeared, this seems to be the exception, and not the rule. The data doesn't exactly show a flood of commerce. Restaurant traffic is down sharply from where they were a year ago, even when take-out and delivery orders are included. There is definitely an upward trend since March and early April, but we're still a long way from anything that could be considered normal.
Air travel is also increasing. The number of travelers processed by the TSA is rising, but this is where we feel compelled to add a note of caution about looking at percentages. The TSA processed an average of 247,455 travelers per day in the seven days that ended May 21. That's up 18.1% from the prior week's average of 196,612. However, that number is down 90.3% from the 2.49 million passengers processed in the same week of 2019.
Those double-digit increases seem huge, but after such a precipitous drop, and coming up from such a low baseline, a big percentage increase doesn't mean as much. That nearly 20% increase was just 43,543 passengers per day, which is less than 2% of the passengers processed per day for the same week in 2019.
The green shoots are encouraging, but it is important to approach this data with the proper perspective. There is still a lot of debate in policy circles about the shape of the economic recovery, with White House economic advisor Larry Kudlow saying this week that a V-shaped recovery is still possible. This belief seems to be much less common among actual economists, as we've already seen temporary layoffs turn into permanent job cuts.
There are still bright spots in the economy though. The housing market is close to fully recovered in terms of home sales. Deere and Co. (DE) reported better-than-expected earnings this morning on sales of top-end tractors.
A number of large companies have announced plans to extend work from home policies into next year, with some even offering to make the option permanent. More work-from-home options could mean fewer office workers in some cities, but those offices are likely to be reshaped with fewer workers per square foot. Likewise, workers who decide to work from home permanently may decide they need room for dedicated office space in their homes, pushing them from some of the highest-rent cities into smaller metro areas or suburbs.
The long-term effects of the coronavirus are likely to reshape any number industries, presenting investment opportunities to investors who know where to look.
All told, this week the S&P 500 gained 3.2%, while the Nasdaq added 3.44% and the Dow Jones Industrial Average rose 3.29%.