Shares soar but Covid will fight back

Last week, the US stock market had its best three-day performance since the 1930s. From Monday to Thursday it surged upwards by 19%. Unfortunately, even so it is still down 19% for the year to date. A possible reason for the market’s resilience is the massive stimulus package approved by the US Congress. The $2 trillion stimulus package is equal to 9,3% of US GDP and almost double the size of the 2009 package which matched “only” 5,5% of GDP at the time.

In South Africa we are in full lockdown for 21 days. On a personal level, I appreciate the strong and decisive leadership demonstrated by Cyril Ramaphosa, but am bitterly disappointed by the arrogance and seeming incompetence of his ministers. Just imagine the horror if Nkosazana Dlamini-Zuma had become president instead of Cyril.

Another small mercy we can be thankful for is that the Covid-19 virus is not yet a monster like Ebola. We have to use this pandemic as a test case for the day a truly terrifying pandemic should hit our beloved world – and it will happen. As we have mentioned before, we have great faith in the medical and scientific establishments around the world to find a cure for this virus, sooner rather than later. But until then you can expect your investments to react on news, good or bad, as the markets try to evaluate an uncertain future.

Some perspective as regards the graph below: Worldwide, there are just over 30 000 reported deaths due to Covid-19 so far. Currently, there are 7,8 billion people in the world. In the US, the 2018-2019 cold-weather flu season saw 34 200 flu-related deaths, so we are only at the start of something bigger. The important difference, however, is that the mortality rate for the flu is 0,1% whereas the mortality rate for Covid-19 is ten times that. We have been speculating about world war three for many years and now we have it. But contrary to previous wars and unite, we have to keep our distance.

So, do take the lockdown seriously, it is there to slow down the spread of the virus and give the medical scientists time to find the silver bullet. And to close, Moody’s downgraded us to junk. We will talk about this next time.

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