A journey of a thousand miles begins with a single step: Potential early signs of progress emerge
The headline for today was a stunning 6.6 million new jobless claims in the U.S. This was a doubling of last week’s record 3.3 million claims. That will likely take the unemployment rate into the 9.5% range, although the non-farm payroll data being released tomorrow will not reflect the recent job losses.
Today, Dallas Federal Reserve President Robert Kaplan said they now expect the unemployment rate to rise into the range of the low to mid-teens. This is a heretofore unbelievably stunning increase in joblessness. And yet, an hour after the announcement, the S&P 500® Index was trading up 2% on the day. As Paul Eitelman said in his post on Monday, April will be a month of horrific headlines and the market expects horrific headlines. It’s not news if it is what you expect.
With those headlines as a backdrop and with the standard caveat of no one can precisely predict the path of the outbreak in mind, I talked about hope on Tuesday, citing the fact that people in China are returning to a more normal way of life as a hopeful precedent that the health crisis of coronavirus can be contained. The hope is that the containment measures many countries have taken will begin to affect the growth rate of the outbreak and, ultimately, halt the increase in daily infections - eventually leading to a fall in the number of cases and deaths.
More specifically, the first sign to be looking for - according to medical experts - is whether or not things are starting to get worse at a slower pace. So far, the path of the virus, unchecked, has demonstrated an exponential growth rate. The first step toward progress will be seeing that rate of growth slow.
This week, we are perhaps beginning to see the impact of the containment measures on this rate of growth. Courtesy of the good folks at Deutsche Bank Research:
- Italy (110,574 cases) saw its lowest growth rate in fatalities (5.8%) since its numbers first jumped, and also saw a stabilisation of new cases (4.5%) at relatively low levels.
- In Spain (104,118 cases), new case growth fell further into single digits at 8.5%. Even more importantly, the growth rate of new fatalities has remained low at 10.9%, the third-lowest of the outbreak.
- Germany’s new case growth has established a tight range in the high-single digits over the past four days. That is a marked improvement from the mid-teen range from the five days previous. The growth in deaths is slowing as well, with the current rate of 20.1% down from the mid-to-high 20s level seen during most of the last week.
- The U.S. now has over 200,000 cases of coronavirus, with nearly 84,000 in New York state alone. Put another way, if New York were a country, it would be the fourth most-infected country in the world. Even excluding New York, the U.S. still has the most cases worldwide. The good news for the region and country is that new case growth rates have slowed this week.
- The growth rate in new cases for New York City and the state is expected to slow into the weekend, given the shutdowns implemented two weeks ago as well as the additional testing procedures since implemented.
- The growth in UK fatalities rose to 31.5% yesterday, and has been trending higher over the last four days. Given that the most severe restrictions have only been in place for ten days now, the UK is still possibly suffering from the more relaxed approached it had in place before this.
While there is no way of telling if these apparently positive early trends will continue, it’s important to remember the age-old saying that a journey of a thousand miles begins with a single step. And that sooner or later, the world will hit its stride again.
Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.