Social Distancing Throws Stick in the Cog
March 20, 2020
It was another challenging week for the market as investors digested ongoing developments in the U.S. coronavirus outbreak. With testing becoming more widely available, the country has seen a surge of confirmed cases. As of Friday afternoon, the U.S. had 16,000+ cases of the virus. The outbreak has spurred state and local officials across the country to take unprecedented actions, including mandates to close all schools, restaurants, bars, and gyms in an effort to flatten the infection rate curve. The New York Stock Exchange also announced it is closing its iconic trading floor on Friday March 20, moving fully to electronic trading on Monday, March 23. The federal government and the Federal Reserve sought to reassure the general public and markets throughout the week as they worked on implementing a series of extraordinary fiscal and monetary measures to combat the looming economic downturn.
Federal Reserve Takes on Coronavirus
The Federal Reserve engaged its heavy firepower this week as the central bank sought to mitigate the potentially devastating effects of the virus on the U.S. economy. On Sunday, the Fed announced it would slash interest rates to 0.00% and launch a massive $700 billion asset purchase program. The bond-buying program will allow the Fed to continue buying Treasurys, mortgage-backed securities, and municipal bonds. The moves come on the heels of other Fed actions designed to maintain liquidity in the financial system, including short-term bank funding. Despite these measures, the Fed still has additional weapons in its arsenal to help support the economy through this rough patch. The central bank could go even further with its bond-buying program, picking up corporate bonds and short-term loans to corporations and businesses. Many of these asset classes are experiencing dislocations from reduced liquidity.
Home Sales Surge While Homebuilding Falls
Existing home sales painted a pretty picture, but the data precedes the effects of Covid-19. Existing home sales surged to a 13-year high, up 6.50% to a seasonally adjusted annual rate of 5.77 million units. That was their highest level since February 2007. By comparison, economists had forecast a 0.70% rise to a rate of 5.50 million units. The median existing home sales price also rose, up 8.00% year-over-year to $270,100. Inventory remained tight at 3.1 months, down from 3.6 months a year ago. That is significantly below the six-to-seven-month supply viewed as a healthy balance between supply and demand. Meanwhile, homebuilding fell 1.50% to a seasonally adjusted annual rate of 1.599 million units last month. The decline was driven primarily by the drop in multifamily construction. This may be the last favorable report we see for a while. Activity will likely dry up in the near future with the full economic impact of the coronavirus still some months off.
To say the world has changed would be an understatement. Two weeks ago, the idea that we would see social distancing measures on the scale and speed that we are now seeing would have been nearly unimaginable. But, here we are, and this is a present and incredible challenge for modern economies that have been built, and valued, on the consistency and velocity of transactions. A stick has been jammed in the cog that runs our basic economic machinery and it doesn’t take an economist to look around and see that this is going to have a big impact for at least a few months. Markets have obviously reacted with fervor. The S&P 500 was down -15% just this week — its largest weekly move since 2008. It is important to remember, however, that back in 2008 the economic machinery had not only seized, but the entire drivetrain had corroded. This is not 2008, and for that we are grateful. We are far more confident in future earnings visibility today than we ever were during the Financial Crisis, and once the healthcare experts contain this virus, this economic engine is capable of humming again.
The Week Ahead
Unfortunately, coronavirus news will once again dominate headlines as economic news will be light. In the U.S., new home sales will be the highlight of the week. Overseas, the Eurozone releases PMI figures.
Arts and Culture from a Couch
Many museums and galleries are closing their doors to the public, but virtual tools, videos, and online tours allow people to browse their art and architecture without leaving home. Below are some amazing virtual tours that may appeal to those looking to experience the best museums in the world from the comfort of a couch.
Guggenheim Museum, New York, New York
The Guggenheim is a modern and contemporary art museum with artwork and paintings by Wassily Kandinsky, Pablo Picasso, Paul Klee, and Joan Miró, among others. The building itself is an architectural masterpiece designed by Frank Lloyd Wright. Audiences can listen to an audio guide of the Guggenheim’s history or take a journey through its spiral halls via the Google Arts and Culture virtual tour.
The Louvre, Paris, France
The Louvre offers three online tours: (1) Egyptian Antiquities, (2) the Galerie d’Apollon — a recently restored part of the museum, and (3) a tour of the remains of the Louvre’s moat that was built in 1190 as a defense against potential attacks via the Seine.
The Musée d’Orsay, Paris, France
This online tour begins with the history of the Beaux-Arts railway station built between 1898 and 1900 that houses the museum, and then transitions into a self-guided virtual tour. The museum holds mainly French art dating from 1848 to 1914, including paintings, sculptures, and photography.
The Anne Frank House, Amsterdam, The Netherlands
The Ann Frank House was established in 1957. Online visitors can watch videos about her life, virtually explore the Secret Annex where Ann Frank and her family were in hiding during World War II and the Nazi occupation of The Netherlands, and view the Google Arts and Culture exhibition, “Anne Frank: Her Life, Her Diary, Her Legacy.”
NASA Research Centers, Multiple Locations
Space enthusiasts can tour a number of NASA facilities, including the Flight Research Hangar, the Supersonic Wind Tunnel, and the Zero Gravity Research Facility in Ohio and the Katherine Johnson Computational Research Facility in Virginia. NASA also offers a 360-degree, virtual tour of the Hubble Space Telescope’s home for mission operations located at NASA’s Goddard Space Flight Center in Maryland.
The J. Paul Getty Museum, Los Angeles, California
The J. Paul Getty Museum at the Getty Center in Los Angeles houses European paintings, drawings, sculpture, and photography. The Getty Center offers virtual tours where you can view the artwork on display and also enjoy the amazing architecture designed by Richard Meier.
The Uffizi Gallery, Florence, Italy
The Uffizi Gallery was constructed in the 1500s and is home to the art collection of the de’Medici family. It features famous works like The Birth of Venus by Sandro Botticelli and Caravaggio’s Medusa. You can view the virtual tour here.
The Palace of Versailles, Versailles, France
You can virtually tour the Palace of Versailles in northern France, including the famous Hall of Mirrors and the gardens of Versailles. Construction began in the 1600s, and the palace served as a French royal residence and center of government.
The Taj Mahal
The Taj Mahal in Agra, India, is widely considered one of the most beautiful buildings ever created. It is said that 20,000 stone carvers, masons, and artists were employed under a team of architects in its construction from 1631 to 1648. You can experience a tour here.
National Gallery of Art, Washington, DC
The famous American art museum features two online exhibits that utilize Google’s Street View technology. The first is an exhibit of American fashion from 1740 to 1895, including many renderings of clothes from the colonial and Revolutionary eras. The second is a collection of works from Dutch Baroque painter Johannes Vermeer.
The Hermitage Museum, St. Petersburg, Russia
One of the world’s largest museums, The Hermitage which was founded in 1764 by Empress Catherine the Great, recently released a five-hour long video tour of the entire museum. The video was created by Apple and shot on an iPhone 11 Pro. The video tour takes viewers through 45 galleries and 588 pieces featuring artists such as Rembrandt, Raphael, Caravaggio, Canova, and more, culminating in a 30-minute musical finale from Russian pianist and composer Kirill Richter.
The Google Arts & Culture project launched a decade ago. It features thousands of high resolution images from more than 2,500 museums and galleries globally. In addition to museum tours, the program offers virtual tours of thousands of outdoor spaces, famous landmarks, historical ruins, cultural sites, natural and man-made wonders, national parks, and more.