Wednesday's Market Minute: A Lower-Case 'r' Recovery

The recent bounce in the stock market is a huge development because it means the S&P 500’s violent decline of 30% was enough to price in at least the first wave of extraordinarily bad economic outcomes of quarantine.

Meanwhile, data from New York City suggests the viral curve may be flattening faster than the worst expectations. Barring any surprises (reinfection being the scariest one), the spread of the virus has dropped rank as a negative market catalyst. If the virus is not the primary concern, and the economic data has yet to be one either, the question now is what life will look like on the other side of this event. What percent of our lifestyle will remain the same, and — crucial in the short-term — what percent of businesses that existed before will exist after?

This is a big factor in the debate over the shape our recovery: a V, U, L, W, etc. If we assume life will largely be what it was before, and that markets have shown we are already pricing in the worst, a sharp move higher once quarantine is lifted would be the result of a flurry of celebratory consumer activity. But with many businesses still reeling, some people in limbo on employment, and the potential for inflationary complications, there’s a good chance that activity will run into resistance: hence, the lower-case ‘r.