The S&P 500 finished the day with a decline of nearly 3%, but if you ask a lot of people who pay close attention to the markets, it didn’t seem that bad.  If you’re one of those people, you can thank the phenomenon of recency bias. That’s because even though the S&P 500 had a 2.93% move today, the average daily move in the four weeks heading into today was a gain or loss of 4.65%.  In fact, over the last 20 trading days, there have only been five where the S&P 500’s average daily move was smaller.

The chart below shows the S&P 500’s average daily percentage move on a 20-day rolling basis going back to 1928.  The S&P 500’s four-week average daily move is now greater than any other time since the weeks after the 1929 crash more than 90 years ago.  Moves of this magnitude are nearly unprecedented in the history of the stock market, and the one precedent we have isn’t a very warm and fuzzy one.  While we don’t want to minimize the significance of the equity market’s decline over the last month, the circumstances surrounding the two periods in terms of the reasons for the decline and the market dynamics during each period aren’t all that similar to each other.  Start a two-week free trial to Bespoke Institutional for full access to our market analysis and much more.

Not even precious metals have been safe from the wave of selling that has hit markets recently. While it could be expected that the massive declines in equities and big increases in liquidity would send gold or silver surging, that has not been the case.  The Gold ETF (GLD) is actually down 3.61% since the S&P 500’s high on 2/19. Meanwhile, silver’s declines are perhaps more in line with risk assets like equities.  The silver ETF (SLV) is down over 28% in that time frame. While there is that massive disparity between the two at the moment, for much of the past year SLV has been the weaker of the two metals. After both peaked in the late summer of last year, only GLD made it back up to fresh highs earlier this year. SLV, on the other hand, has cratered, reaching $12 one week ago. That is the lowest level since April of 2009.

With silver underperforming by such a wide degree, the GLD (gold) to SLV (silver) ratio has gone vertical (chart below) to levels never seen since the two ETFs have both been trading (2006).  Again, gold’s outperformance is nothing new as this has been the case for most of the past decade.  But the degree of gold’s recent outperformance has been much more dramatic. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Economic data generally continues to remain of lesser importance than headlines due to the backward looking nature of the information, but recent indicators are beginning to reflect changes as a result of the coronavirus.  Last Sunday night, the Fed kicked off the week with a return to ZIRP. Then on Monday, the New York Fed’s reading on the region’s manufacturing businesses posted its largest one month decline on record and its worst reading since the financial crisis. The Philadelphia Fed’s survey later in the week similarly deteriorated rapidly as it experienced its largest one month decline on record. These two surveys set a very negative tone for the other three regional Fed surveys scheduled to release this week and early next week. Last week’s retail sales were dramatically weaker than expected with every measure outside of the control group (which was flat in February) declining month-over-month.  Homebuilder sentiment and other housing data like starts and existing sales also remained propped up thanks to lower interest rates, though, as rates have risen more recently that picture could subside a bit as was the case with last week’s mortgage applications. Finally, one of the most timely indicators, weekly jobless claims, spiked to 281K as an increased number of US workers remain quarantined at home.

While claims have generally been one of the most widely watched indicators of late, this week they are sure to take center stage as forecasts are calling for an increase of 1.4 million as more and more businesses halt operations. Though it is not likely to show coronavirus effects in the same way, elsewhere in labor data, we will get personal income and spending numbers this week.  Following up on the NY and Philly Feds’ weak readings, the Richmond and Kansas City Feds will be releasing their respective manufacturing indices. Each one is expected to fall significantly to -10. Elsewhere in manufacturing data, Markit’s preliminary PMI is expected to fall into contraction territory alongside the services counterpart which had already fallen below 50 in February. Preliminary manufacturing hard data is also scheduled to release this week and is expected to decline MoM across headline and core measures. On the consumer front, University of Michigan sentiment is scheduled to round out the week with a decline to 89.5 from 95.9. Quarterly GDP data is also set to be released this week, but is one of the more lagged indicators and as such will only show the picture of a pre-coronavirus world. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2020 Annual Outlook special offer.

Epidemiology

Coronavirus: The Hammer and the Dance by Tomas Pueyo (Medium)

After the initial surge in cases, society will have to work hard to prevent new surges of cases as the virus continues to circulate at a much slower rate within the broad population. [Link]

99% of Those Who Died From Virus Had Other Illness, Italy Says by Tommaso Ebhardt, Chiara Remondini, and Marco Bertacche (Bloomberg)

As a share of total deaths in Italy, only 0.8% came to patients who had no other major illness, pathology, or comorbidity like heart disease, diabetes, a history of cancer, or asthma. Roughly half of deaths came from individuals with three or more such complications, suggesting only specific populations are at mortal risk from the virus. [Link; auto-playing video]

What if there already is a large latent-immune population? by Brett Winton (Medium)

The author proposes that existing immunities to the coronavirus that causes common colds exist in the population and may serve to cap the spread of COVID-19. [Link]

Coronavirus Is Hiding in Plain Sight by Benedict Carey (NYT)

Some studies suggest that so many people are so lightly impacted by COVID-19 that there are five to ten undetected infections for every one person that tests positive. [Link; soft paywall]

A human monoclonal antibody blocking SARS-CoV-2 infection by Chunyan Wang, Wentao Li, Dubravka Drabek, Nisreen M.A. Okba, Rien van Haperen, Albert D.M.E. Osterhaus, Frank J.M. van Kuppeveld, Bart L. Haagmans, Frank Grosveld, and Berend-Jan Bosch (bioxRxiv)

The authors claim to have identified an antibody which would neutralize the virus as a possible mean for both prevention and treatment of the disease. [Link]

Corona Controversies

To Track Virus, Governments Weigh Surveillance Tools That Push Privacy Limits by Kirsten Grind, Robert McMillan and Anna Wilde Mathews (WSJ)

A variety of technological solutions for the COVID-19 outbreak are likely to bring the government and technology companies into direct conflict with civil rights and advocacy groups. [Link]

A Generational War Is Brewing Over Coronavirus by Bojan Pancevsk, Stacy Meichtry, and Xavier Fontdegloria (WSJ)

Social gatherings of young people are a potent source for the spread of the coronavirus, but that group of the population doesn’t see much risk from COVID-19 and may create major risks for groups that face a higher death rate or partiers themselves. [Link]

A Costco Corporate Employee Died From COVID-19, But Staff Still Need Approval To Work From Home by Brianna Sacks (BuzzFeed)

A company policy designed to show solidarity with front-line retail workers meant no working from home for corporate employees of Costco in Seattle, even after an employee at the office died from the disease. [Link]

Viral Solutions

IBM Supercomputer Summit Attacks Coronavirus… by Anders Quitzau (IBM)

The Oak Ridge National Lab is using an IBM supercomputer that uses 27,000 NVIDIA GPUs and 9,216 CPUs to identify molecules which may serve as a potential method of defeating the virus. [Link]

The Surprising Way Durham Distillery is Helping Fight Coronavirus by Caroline Sanders (Garden & Gun)

A North Carolina distillery had flipped production from potent potables to stronger stuff which can serve as a sanitizing product; demand has surged amidst shortages across the country. [Link]

Firm ‘refuses to give blueprint’ for coronavirus equipment that could save lives by Faye Brown (Metro)

A hospital in Brescia ran out of a small oxygen valve that served as a key component in a ventilator; a local with a 3-D printer reverse-engineered the part and was producing it at home within hours. [Link]

Sports

NASCAR is taking advantage of esports after postponing live events due to the coronavirus pandemic by Mariel Soto Reyes (Business Insider)

Stock car drivers are heading to a virtual race track after all races have been postponed through May 3^rd. Drivers will compete online instead of in-person. [Link]

AP sources: MLB could skip draft; service time big issue by Ronald Blum (AP)

As leagues reel from cancelled games and lost revenue, baseball is considering skipping its draft as players demand credit for a season of service even if a full slate is never played. [Link]

Investor Impact

Hedge Funds Hit by Losses in ‘Basis Trade’ by Juliet Chung (WSJ)

Fixed income relative value has been wrecked by the volatility brought on by COVID-19, and the relationship between cash bonds and futures has been a special source of pain across various chunks of the fund universe. [Link; paywall]

Brace for earnings numbers like you’ve never seen before by Sam Ro (Yahoo! Finance)

Earnings season is just around the corner and it is set to be absolutely horrific thanks to the widespread declines in economic activity brought on by COVID-19. [Link; auto-playing video]

Rich People Are Raising Cash From Their Art Collections by Katya Kazakina and Tom Mecalf (MSN/Bloomberg)

Cash is cash, and with all cash fungible you find liquidity where you can. These days, for the wealthiest, that place is in fine art, with a $10mm Basquiat, $30mm in rare contemporary art, and financing trades on existing purchases all going through. [Link]

Corona Malfeasance

Weeks Before Virus Panic, Intelligence Chairman Privately Raised Alarm, Sold Stocks by Tim Mak (NPR)

The chairman of the Senate Intelligence Committee, Senator Richard Burr of North Carolina, warned a private group of donors and liquidated an equity portfolio after receiving a private briefing on the COVID-19 outbreak in February, contrary to public advice from the administration. [Link]

Timeline: The early days of China’s coronavirus outbreak and cover-up by Bethany Allen-Ebrahimian (Axios)

The spread and severity of COVID-19 around the world has been amplified by numerous policy mistakes, but its original spread in China was farther and faster than necessary thanks to mistakes made inside that country. [Link]

Gaia’s Revenge

‘Nature is taking back Venice’: wildlife returns to tourist-free city by John Brunton (The Guardian)

Venetian lagoons are clearing up as COVID-19 keeps tourists, cruise ships, and speed boats at bay. [Link]

This Boeing 787 Just Set a Record for the Longest-Ever Passenger Flight, Thanks to Virus by Rob Stumpf (The Drive)

Unable to land in Los Angeles, the Tahiti-Charles de Gaulle 787 Dreamliner flight spent just fewer than 10,000 miles in the air thanks to just under 16 hours of steady flying. [Link]

Read Bespoke’s most actionable market research by joining Bespoke Premium today!  Get started here.

Have a great weekend!