Investing

Painting (the market) by numbers

Ten factoids to illustrate how the COVID-19 pandemic is impacting the economic and market landscape.


Our Top Market Takeaways for April 10, 2020.

Painting (the market) by numbers

Before we dive in, we want to express our sympathy for all those who are suffering from this pandemic, and appreciation for the many people on the frontlines who are working to save lives every day. During these uncertain times, we are particularly grateful to share our insights with you.

We’re sending our warmest wishes to you and your families for healthy and safe springtime holidays. In lieu of making matzoh houses or dip-dyeing eggs, we’ve decided to paint a picture of the current market and investment landscape by numbers.

1.    1.6 million: The number of people infected by COVID-19 around the world. As we have maintained, the path of the virus is the most important factor for human health and safety, the economy and markets.

This week, both Italy and Spain have seen fewer daily new cases than they averaged in the week prior. In the United States, daily new cases have been consistently below the high reached on April 4 (34,123). But while we’re seeing glimmers of hope that the virus curve is flattening in the West, the East has been experiencing a resurgence in cases. Both Japan and Singapore, despite experiencing the start of the pandemic ahead of the United States, have reinstituted restrictive social distancing measures this week to work against a surge in new cases.

Line chart shows the confirmed number of COVID-19 cases, against the number of days since crossing 100 cases for the United States, Spain, Italy, Japan and Singapore. It indicates that through April 10, 2020, the United States, Spain and Italy had the largest number of cumulative cases.

Description: Line chart shows the confirmed number of COVID-19 cases, against the number of days since crossing 100 cases for the United States, Spain, Italy, Japan and Singapore. It indicates that through April 10, 2020, the United States, Spain and Italy had the largest number of cumulative cases.

 

2.    16.8 million: The number of Americans who have filed for unemployment benefits over the last three weeks. This severe decline in employment has been historically fast. In the last seven recessions, it took more than 13 times as long to reach 15 million new initial jobless claims. This represents over 10% of the U.S. labor force. And if all 16.8 million people who have filed claims for unemployment benefits ultimately register as “unemployed,” then the unemployment rate reported in the April U.S. jobs report could be as high as 13% (and by the way, we expect more claims to roll in). This would mark the highest unemployment rate since the Great Depression, and would mean that the U.S. economy went from a 50-year low in unemployment (3.5% at its last pre-COVID-19 crisis reading) to an 80-year high…all over the course of a month.

Of course, the CARES Act brings a host of benefits to many of these workers, and a good chunk are likely to be re-employed on the other side of this pandemic. Nonetheless, the steep decline demonstrates the halt we are seeing in economic activity and a foreshadowing of the dismal data we are sure to see in the months ahead.

Graphic shows the number of U.S. initial jobless claims for three weeks ending in March 21, March 28 and April 3—for a total of 16.78 million claims as of April 9, 2020. Whereas, the graphic illustrates across prior U.S. recessions, the number of weeks to reach 15 million claims was an average of 39 weeks.

Description: Graphic shows the number of U.S. initial jobless claims for three weeks ending in March 21, March 28 and April 3—for a total of 16.78 million claims as of April 9, 2020. Whereas, the graphic illustrates across prior U.S. recessions, the number of weeks to reach 15 million claims was an average of 39 weeks. 

 

3.    24.7%: The S&P 500’s eye-popping recovery rally since its March 23 low. The optimist might be convinced we are in the midst of a new bull market, while the pessimist might suggest we’re experiencing a “bear market rally”—a short-term surge in stocks amid a longer spiral to the bottom. The Global Financial Crisis, for example, saw several fits and starts along the way—rallying as much as 24% at one point before ultimately hitting its trough on March 9, 2009.

Saying with certainty which direction we’re headed in can only be done with the gift of hindsight. What we can say is that we are approaching stocks with an abundance of caution. It is possible markets will grind higher in the months ahead, but we think it’s more likely the S&P 500 trades lower from here before it eventually recovers. Why? With the path of the virus still uncertain, the brunt of the economic decline still ahead of us, and the bulk of current policy efforts only likely to support the economy over the next 6–8 weeks, there is plenty of news ahead for markets to digest. We do think it’s unlikely the S&P 500 will make a new low (below 2,237 from March) from here, though. 

Line chart shows the distance from the previous low for the S&P 500 Index during the Global Financial Crisis, spanning October 2007 through March 2009. The line chart indicates that the S&P 500 Index rallied as much as 25% at one point before ultimately hitting its trough (low point) on March 9, 2009.

Description: Line chart shows the distance from the previous low for the S&P 500 Index during the Global Financial Crisis, spanning October 2007 through March 2009. The line chart indicates that the S&P 500 Index rallied as much as 25% at one point before ultimately hitting its trough (low point) on March 9, 2009.

 

4.    2,370–3,050: The range the S&P 500 is likely to trade within between now and June 30. According to the options market, there is a 25% chance the S&P 500 will be below 2,370 (or -15.0% from current levels) and a 25% chance it will be above 3,050 (+9.4% from here) by that date. This means there is about a 50% probability we land somewhere in the middle of that 680 point range. That’s a lot of variability, and it’s skewed to the downside.

5.    $900 billion: The total estimated amount of securities the Fed has purchased over the last three weeks as part of its latest Quantitative Easing (QE) program. This already exceeds the total program for QE2 (around $0.6 trillion), and is gaining quickly on QE1 ($1.5 trillion) and QE3 ($1.2 trillion). Bottom line: The Fed is buying securities at a record pace to support the economy, and more measures continue to be announced. Just yesterday, the Fed provided more details on its liquidity facilities and the Main Street Lending Facility, aimed at putting cash in the hands of medium-sized businesses.

The bar chart shows the number of securities the Fed has purchased as part of Quantitative Easing (QE) programs. It indicates the following, QE1 ($1.5 trillion) in 25 weeks, QE2 (around $0.6 trillion) in 35 weeks, and QE3 ($1.2 trillion) in 42 weeks. For QE4, which is March 2020 through today, the Fed has purchased an estimated $900 billion in securities.

Description: The bar chart shows the number of securities the Fed has purchased as part of Quantitative Easing (QE) programs. It indicates the following, QE1 ($1.5 trillion) in 25 weeks, QE2 (around $0.6 trillion) in 35 weeks, and QE3 ($1.2 trillion) in 42 weeks. For QE4, which is March 2020 through today, the Fed has purchased an estimated $900 billion in securities. 

 

6.    $5.7 trillion: The approximate sum of the U.S. government’s planned loan guarantees and fiscal easing in response to the COVID-19 crisis, which amounts to over 25% of GDP. This scale of fiscal support is unprecedented, and is more than double the size of the response to the Global Financial Crisis. We’re often hearing the question of what that means for the U.S. budget deficit and federal debt. The budget deficit is likely to exceed 15% of GDP this year, and federal debt-to-GDP is poised to climb toward an all-time high above 100%. Fortunately, the government is able to borrow money at historically low interest rates. So long as deficits are reduced in the years ahead and nominal growth rebounds above borrowing rates as economic conditions normalize, we don’t think the level of U.S. government debt is a terrible concern for investors at this time.

7.    57: The number of companies in the S&P 500 with a positive price return year-to-date. Taking a look at who has fared best, Regeneron Pharmaceuticals (+36.6%) is on top thanks to optimism around its efforts to develop prevention and treatment drugs for COVID-19. Newmont Corporation (+31.9%) is a gold mining company whose stock has risen along with demand for the shiny yellow safe haven. Citrix (+25.7%), known for its virtual private networking software, is benefiting from all of us having to work from home—the same can be said for SBA Communications (+26.9%) and Digital Realty Trust (+23.8%), which are on the real estate side of wireless communication, internet and data exchange. As for those who have been hardest hit? Look no further than travel-based companies (like cruise lines) and those involved with energy exploration and production. 

The graphic ranks the S&P 500 five best performers and five worst performers, ranked by % price return.

Description: The graphic ranks the S&P 500 five best performers and five worst performers, ranked by % price return. 

 

8.    142 years: The amount of time that will have passed since crude oil had a year almost as bad as this one, assuming 2020 ends with oil prices at current levels. Brent crude prices are down -52.2% since last year—worse than the current annual record decline of -50.8% set in 1878. Lest you’ve forgotten: The combination of severe demand disruption from COVID-19 lockdowns and jump in supply from the market-share battle between Saudi Arabia and Russia has caused oil prices to plummet this year. 

The line chart shows the year-over-year % price change in oil prices. It illustrates that Brent crude prices are down -52.2% since last year—worse than the current annual record decline of -50.8% set in 1878.

Description: The line chart shows the year-over-year % price change in oil prices. It illustrates that Brent crude prices are down -52.2% since last year—worse than the current annual record decline of -50.8% set in 1878. 

 

9.    9%: The average annual total return an investment in the S&P 500 would generate even if it took three years to get back to its February 2020 high. That exceeds the average annual total return of the S&P 500 over the past 20 years of 8.3%. The index still needs to rally more than 20% from current levels to get back to its peak, and uncertainty surrounding COVID-19 looms large. The silver lining? If history is any indication, those with the discipline to stay invested through volatility and put time on their side will be rewarded.  

The bar chart shows the percentage average annual total return needed for the S&P 500 to get back to market highs. The bar chart indicates the average annualized return and cumulative total return required to get back to peak, for one to 10 years.

Description: The bar chart shows the percentage average annual total return needed for the S&P 500 to get back to market highs. The bar chart indicates the average annualized return and cumulative total return required to get back to peak, for one to 10 years. 

 

10.    0.8%: Our Advice Lab’s outlook for the U.S. Treasury discount rate for the month of May, which would be its lowest level in history. The Treasury discount rate not only sets the rate for intra-family loans, but also sets the rate for annuities paid out of gifting strategies like Grantor Retained Annuity Trusts (GRATs) and Charitable Lead Annuity Trusts (CLATs). When the rate is low, gifters may be able to transfer more wealth to beneficiaries in a tax-efficient manner. What’s more, transferring assets when their values are depressed (as in the current environment, after a sizeable selloff) can also make for more efficient wealth transfers. The point here is that now may be a good time to reflect upon your financial goals and plan, and consider taking action if it makes sense to do so. Your J.P. Morgan Advisor is here to help you along the way. 

 

 

All market and economic data as of April 2020 and sourced from Bloomberg, FactSet and Gavekal unless otherwise stated.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

RISK CONSIDERATIONS

  • Past performance is not indicative of future results. You may not invest directly in an index.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.

 

 

 

 

Important Information

All companies referenced are shown for illustrative purposes only, and are not intended as a recommendation or endorsement by J.P. Morgan in this context.

All market and economic data as of April 2020 and sourced from Bloomberg, FactSet and Gavekal unless otherwise stated.

The information presented is not intended to be making value judgments on the preferred outcome of any government decision.

This material is for informational purposes only, and may inform you of certain products and services offered by
J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Please read all Important Information.

  • The MSCI China Index captures large- and mid-cap representation across China H shares, B shares, Red chips, P chips and foreign listings (e.g., ADRs). With 459 constituents, the index covers about 85% of this China equity universe. Currently, the index also includes Large Cap A shares represented at 5% of their free float adjusted market capitalization.
  • The Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The index was developed with a base level of 10 for the 1941–43 base period.
  • The STOXX Europe 600 Index tracks 600 publicly traded companies based in one of 18 EU countries. The index includes small-cap, medium-cap and large-cap companies. The countries represented in the index are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Holland, Iceland, Ireland, Italy, Luxembourg, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

This material is for informational purposes only, and may inform you of certain products and services offered by
J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.  

IMPORTANT INFORMATION ABOUT YOUR INVESTMENTS AND POTENTIAL CONFLICTS OF INTEREST

Conflicts of interest will arise whenever JPMorgan Chase Bank, N.A. or any of its affiliates (together, “J.P. Morgan”) have an actual or perceived economic or other incentive in its management of our clients’ portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product, separately managed account or hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate; (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client’s account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing, recordkeeping or custody) with respect to investment products purchased for a client’s portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account.

Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio’s investment objective.

As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as cash and high-quality fixed income, subject to applicable law and any account-specific considerations.

While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that

J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios.

The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services. 

LEGAL ENTITY, BRAND & REGULATORY INFORMATION

In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM.

This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for nonpersonal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan representative. 

 


Check the background of Our Firm and Investment Professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our  J.P. Morgan Securities LLC Form CRS and  Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
Equal Housing Opportunity logo

J.P. Morgan Chase Bank N.A., Member FDIC Not a commitment to lend. All extensions of credit are subject to credit approval 

“J.P. Morgan Securities” is a brand name for a wealth management business conducted by JPMorgan Chase & Co. (“JPMC”) and its subsidiaries worldwide. JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.