Covington Investment Advisors, Inc. Blog

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An Update on Market Events

Peak in Global Infection Rate

Cases from around the globe continue to grow as widespread testing is being rolled out. To track the trajectory of the virus we are watching how fast the infection grows in a country after the number of cases exceed 100. China began to stabilize after roughly 36 days. When excluding Hubei, the epicenter of the Virus outbreak, this stabilization came even earlier at around 26 days. Although we try using other countries that are further along in their timeline as precedents it is important to keep in mind that not all countries are following the same trajectory. Italy, for example is experiencing rapid spread of the virus stemming from cultural norms such as tight living conditions and an aging population. South Korea has already flattened their curve by extensive testing and quarantine measures. 

Coordinated Stimulus

Over the weekend the senate failed to come together on a comprehensive $1.8 trillion package that would provide much needed stimulus for businesses that are currently being crunched by the mandated government shutdown. The longer Washington takes to craft a piece of legislation the shorter the window gets before lasting damage is done to the economy. If you recall in 2008, Congress failed to pass the TARP bill on the first vote which made preventing the shock from the financial collapse more difficult but eventually a deal did get done.

Although many S&P 500 companies have the resources to weather a short, government mandated shutdown, many small businesses do not. Considering these small businesses are the foundation of the US’s employment base it is vital that a package gets passed to backstop them.

 

 

 

This concentration in small businesses also makes it difficult from a logistics standpoint to get relief out to these fragmented parties. The practical problems with writing checks to 130 million households across the United States are enormous. The longer it takes for fiscal negotiations to conclude, the deeper the ongoing slowdown will be.

For us to reach the market bottom we would need for our cases to stabilize calming the markets. We also need our lawmakers to come together and complete the coordinated fiscal package that will provide confidence back into the market. 

 

 

 

Commentary Disclosures: 

 

 The information contained in this commentary has been compiled by Covington Investment Advisors, Inc. from sources believed to be reliable, but no representation or warranty, express or implied, is made by Covington Investment Advisors, Inc., its affiliates or any other person as to its accuracy, completeness or correctness. 

 

Under no circumstance is the information contained within this correspondence to be used or considered as an offer to buy or sell or a solicitation of an offer to buy or sell any particular security.  Nothing in this correspondence constitutes legal, accounting, or tax advice or individually tailored investment advice, or research. This material is prepared for general circulation to clients, and does not have regard to the particular circumstances or needs of any specific person who may read it.  The recipient of this correspondence must make his or her own independent investment decisions regarding any securities or financial instruments mentioned herein. Past performance is not indicative of future results. 

To the full extent permitted by law neither Covington Investment Advisors, Inc. nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct, indirect or consequential loss arising from any use of this market commentary or the information contained herein. This correspondence may not be reproduced, forwarded or copied by any means without the prior consent of Covington Investment Advisors, Inc.

 

Investors should review this correspondence knowing that any comments and opinions made in this correspondence are subject to change and positions held by the authors may be sold. 

 

 

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Covington Investment Advisors, Inc.
301 E. Main Street
Ligonier, PA 15658
Phone: 724-238-0151
Fax: 724-238-0148
Email: covington@covingtoninvestment.com