“March Market Madness Receives Federal Lift” – Vista Partners’ Weekly Market Wrap – March 13, 2020

We had a completely volatile week in both the markets and in life with all manner of headlines coming at us along with a number of changes to our normal lifestyles.  It was exhausting, to say the least as most do not like change, & this week’s market sessions did not make it any easier. The markets were pressured with significant and problematic volatility that pushed the markets spiraling downward and tensions flew high. This came, as we all, unfortunately, know alongside the worldwide growth and second by second over-reporting of the developing coronavirus situation and the subsequent measures deployed towards its containment in order to blunt or flatten the curve & fueling the resulting rising concerns and realizations of slowing or halted global growth. These containment procedures increased throughout the week including closures & suspensions of many schools, athletic tourneys, and leagues, businesses, and flights between the US to Europe. It was a whole new type of “March Madness” that none of us in the US wanted to experience.

Regardless, we are making progress towards implementing additional needed measures towards the fight to slow the growth of coronavirus and to address the current and possibly extended economic slowdown and seemingly bringing light to the end of this perceived endless avenue of sickness and risk. Indeed, on Thursday, the Fed officially stepped forward with financial support by adding liquidity to the markets with a $1.5T package being offered through repurchase (Repo’s) agreement. These operations are based out of the Federal Reserve Bank of New York & will seek to provide financing for banks & broker-dealers at the center of the economy to enable and ensure trading and flow of the markets, etc.

At the end of the week, the markets received additional comfort and support from the White House as it declared a national emergency over the coronavirus outbreak, which sounds a bit strange at first, but does allow for more direct measures to be implemented and it gives greater hope and clarity around the situation which is much needed. In the combined formal speech on Friday, the White House and leaders from leading private sector companies i.e. Walmart, Walgreens, CVS, Target, Roche, Becton, Dickinson and Company, Labcorp and Quest Diagnostics, stated that they will be working together in a joint public & private partnership to bring forth greater order, testing, and progress against coronavirus.  The White House also pledged to bring forth additional funding to support and address the resulting current economic downturn. They will seek to buy, as stated,  “massive” amounts of oil to support the industry and jobs as prices have fallen north of 50% from its 52-week high and further suffering a price war between Saudia Arabia and Russia. Oil prices dropped significantly this week to end at $31.80/bbl down from $41.32/bbl last week & are picking up in the aftermarkets. The White House will also waive interest on student loans, provide $50 billion in assistance to state governments, and they suggested that a further combination of fiscal and monetary support and more would be revealed about other supportive measures. The markets flew up preceding and most definitely post this speech full of declarations. In addition, late Friday night (pacific time) the House passed a bill that will provide further support including 2 weeks of sick leave for workers affected by the coronavirus pandemic, where the government will reimburse 100% of the cost to employers. The bill will also make tests freely & more widely available to whoever needs it that includes those without insurance. The bill also includes provisions that would expand unemployment insurance which is believed to give states more funding in the case that there is a jump in job losses because of coronavirus. The bill also is giving more flexibility on which individuals are eligible for the food stamp program, a school lunch program used to feed low-income children during the summer, as well as, the Women, Infants, and Children nutrition program however it falls short of giving a payroll tax cut that was envisioned to be included. All in all, this all moves seem to be very productive and proactive and should go far to support efforts. 

However, in a review of trading for the week, the markets finished significantly lower overall for w/w even though it jumped up by +9% range into the close on Friday.  The Dow ended the week at 23,185.62, down -10.4% and is now down -18.8% YTD. The S&P 500 ended the week at 2,711.02, representing a -8.8% weekly loss and is now down -16.1% YTD. The Nasdaq Composite closed at 7,874.88 on Friday, representing a weekly -8.2% downward move and is now down -12.2% YTD. The Russell 2000 moved lower closing at 1,209 representing a weekly -16.6% drop and is now down -27.5% YTD. 

The Velocity Shares Daily 2x VIX Short-Term ETN (TVIX), a leveraged bet against the market, was a big winner again this week as it ended at $335.40/share (after hitting $437.46 in intraday trading) & up from $169.90/share last Friday’s close, The 52-wk low is $38.33 which was realized relatively recently.

Here’s a summary of this week’s economic reports: On Tuesday, we received the NFIB Small Business Optimism Index for February, which confirmed a higher move to 104.5. On Wednesday, the Consumer Price Index (CPI) report revealed a move higher by +.1% month/month in February & the core CPI moved higher by +.2%. The Treasury Budget report for February also confirmed a deficit of $235.34B vs. a deficit of $233.98 bln a year ago so, not a great deal of change. The weekly MBA Mortgage Applications Index report showed a massive +55.4% increase with the lowering of interest rates. On Thursday, the Producer Price Index for February dropped by -.6% month/month & the core PPI dropped by -.3%. The initial jobless claims report confirmed a drop by 4k for the week ending March 7 to 211k while continuing claims for the week ending February 29 dropped by 11k to 1.722M. On Friday, the Import prices report showed a move lower by -.5% m/m in February, excluding fuel it was up +.3% while the export prices report showing that it went down by -1.1%. The preliminary March reading for the University of Michigan’s Index of Consumer Sentiment confirmed that it went to 95.9.

The FAANG stocks also closed down overall this week but moved up on Friday leading the markets. Facebook (FB) closed at $170.28/share, +10.23% Friday, ($181.97/share a week ago), Amazon (AMZN) closed at $1,785/share, +6.46%, ($1,901.09/share a week ago), Apple, Inc. (AAPL) closed at $2877.97/share, +11.98% Friday, ($289.03/share a week ago), Netflix (NFLX) closed at $336.30/share, +6.68% Friday, ($368.97/share a week ago) & Alphabet (GOOG) closed at $1,219.73/share, +9.4%, ($1,298.41/share a week ago.)

Gold prices fell this week and failed to prove to be a defensive position closing at $1,530/0z. down from $1,674.20/oz. Silver closed sharply lower at $14.74/oz down from $17.35/oz last Friday. 

The U.S. Dollar Index strengthened to end the week at 98.69 up from 98.13 last week.  The 2-yr Treasury yield closed at .506%, the 10-yr yield closed at .981%, & the 30-yr yield ended at 1.548%. The Fed’s interest rate decision will come on Wednesday, March 18 and is expected to cut rates up to .75 basis points. 

In the meantime, hold on to your hats, enjoy the weekend at home with the family, appreciate what you have, and plan and dream of what life may bring all of us in we can move forward safely through this period together. We will find a way in this world that currently is inhabited by more than +7.7 Billion people.  

Also, enjoy the balance of the weekly newsletter and especially review the healthcare section where we highlight the progress of a couple of companies:

Atossa Therapeutics (ATOS) that rose +17.18%  on Friday after announcing an upcoming meeting with the FDA on Friday

INVO Bioscience (IVOB) rose 10% on Friday and announced a further key hire in Asia continuing the global rollout of their INVOcell system, a revolutionary in vivo method of vaginal incubation that offers patients a more natural and intimate experience.

Another bright spot in biotech was served from San Francisco’s Vir Biotechnology (VIR) which rose another +16.12% to close at $43.66/share. Vir announced that it has signed a letter of intent with Biogen Inc. (BIIB) for the development and clinical manufacturing of human monoclonal antibodies for the potential treatment of COVID-19, the disease caused by the SARS-CoV-2 virus. Because of the urgency of the situation, the companies have begun work while a Clinical Development and Manufacturing Agreement is being negotiated. Subject to the completion of a definitive agreement, Biogen would continue cell line development, process development, and clinical manufacturing activities in order to advance the development of Vir’s proprietary antibodies. week a research collaboration agreement with the National Institutes of Health (NIH) and the National Institute of Allergy and Infectious Diseases (NIAID), Vaccine Research Center (VRC) to advance characterization and development of human monoclonal antibodies (mAbs) against coronaviruses, including SARS-CoV-2, the virus that causes the disease COVID-19. The joint project, which will begin this week, will augment ongoing efforts by both parties to identify antibodies that can be used to prevent or treat the infection with existing and emerging viruses and help inform the development of vaccines. Under the terms of the agreement, Vir and NIAID will work together to identify and optimize combinations of antibodies against coronaviruses, including SARS-CoV-2, SARS, and MERS, as well as antibodies that may be effective across additional types of coronaviruses. The two parties will exchange antibodies and other materials for testing in combination and individually and, by mutual agreement, will perform in vivo animal studies to analyze immune responses.

Investing & Inspiration

“If all the economists were laid end to end, they’d never reach a conclusion.
-George Bernard Shaw

“The riskiest thing we can do is just maintain the status quo. I get up at 4:30 in the morning, seven days a week, no matter where I am in the world. I think it is important for people who are given leadership roles to assume that role immediately. What I’ve really learned over time is that optimism is a very, very important part of leadership.” – Bob Iger, Former Ceo of Disney

“In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham

“In investing, what is comfortable is rarely profitable.” -Robert Arnott

“The fundamental law of investing is the uncertainty of the future.” -Peter Bernstein

“How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen

“Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.” -Michael Platt

“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers

Tomorrow

We have a full week of trading next week and are due to receive the following significant economic data:

• The Fed’s interest rate decision on Wednesday
• The retail sales on Tuesday
• The housing starts on Wednesday
• The leading economic index on Thursday.