This Covid-19 News May Trigger a Big Rally

Summary: stock markets are forward-looking. They act on what might happen 4-6 months into the future. So early signs that the future will start to get better can have a big positive impact on stocks, especially after they’ve been beaten down. I’m not saying this is the definitive “all clear” for stocks, but it is a very early sign that things could start improving. Something to keep watching.

It looks like the Covid-19 coronavirus pandemic is starting to weaken. Obviously this is very preliminary data, but the rate of growth of total new cases might be slowing.

The two charts below show on a log scale the number of Covid-19 cases in the United States. A diagonal line on a log chart indicates exponential growth. A flattening line indicates a slowing of the exponential growth rate of new cases. The lines are starting to flatten.

The next chart shows the number of new cases of Covid-19 in the United States reported daily. As you can see, the final data point showed a fairly significant decline in new daily cases.

New York State has also experienced a decline in new deaths, as reported by Governor Cuomo. Another sign the virus spread is starting to slow.

This slowing phenomenon is also occurring on a global scale. (With half of humanity on lock-down you’d certainly hope so.) The final two data points in the chart below shows a significant slowing of new case growth worldwide.

While this is early data, stock markets are already taking this information to potentially form a new rally (markets were up 7%+ today). I suspect the trend – both medically and financially – may continue for a while but keep watch to see how this develops. By no means am I giving the ‘all clear’.

Of course, the real economy won’t mend as quickly as financial markets. This might take years to recover from – especially if there’s a second wave of Covid-19 in the fall.

Still, we all could use a light at the end of the tunnel. We may see one very soon.

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The Covid-19 economic crisis is gripping the world. After 20 years in the asset management business, it looks like we are fighting through unprecedented territory.

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