No bottom until the virus tops

This is how I feel right now.

Yesterday, Batnick asked me if I thought Monday’s thrashing might have represented the bottom for the S&P 500. I don’t.

I also don’t see this morning’s agreement in Congress as “stimulus.” I see it as a rescue. Stimulus is what you do for a slowing economy. This is an economy that’s gone into cardiac arrest. So we’re taking out the paddles to try to keep it alive awhile longer. Same with the Fed’s rate cuts and resumption of QE. We’re keeping the patient alive.

Checks in the mail coupled with increased unemployment benefits are a good thing, don’t get me wrong. But the way to think about this plan is that at best it’s going to prevent civil unrest. Talk to me a month from now if we’re all still in our houses. In the meantime, Q1 earnings reports are going to be shocking. We’re weeks away from seeing them, along with the accompanying guidance, assuming any CEO actually wants to issue guidance. We’re also still a week and change away from seeing March employment data, which is going to be so outrageous it will look like a typo. April will be worse, regardless of all the fiscal programs being announced. The only way stocks can hold on through all of that is if we start succeeding on the health front. No sign of that in sight.

And so what Congress and the Fed have done is fine. But the underlying problem has not been fixed.

I don’t see any meaningful bottom for stocks until we get some wins against the virus. Italy has to see new infections peak. That will be a huge upside catalyst for the market when it happens. New York will be even bigger. But neither of these things appears to be imminent. Everything reads as though the situation is getting worse, and faster.

Is this applicable to whether or not one should try to market-time a bottom in stocks? I don’t think so, only because I believe the market will be faster to figure out that the disease has topped out than I will. I hope I’m wrong and that we’ve seen the worst for stock prices. I just don’t think so. Not with the infection rate in New York City still doubling every three days and huge regions across the country acting as though this is no big deal and we’ll be able to “pack the churches” by Easter.

We’re just not where we have to be yet. We need some wins.

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