Humanity Rallies to Battle Coronavirus
By: Jeffrey A. Hirsch
March 19, 2020
Welcome to the new digital world. Life has surely become more challenging as we all hunker down to stem the spread of the novel coronavirus. Many folks are now out of work or were forced to close their business during this social distancing decree. Some of us are fortunate enough to be able to continue working or running our business from home. We at Hirsch Holdings and at are here and open for business, so feel free to call or email if you have questions, comments or requests. 
Only four positions remain in our Almanac Investor Stock and Sector Rotation ETF Portfolios. Most have been stopped out. Our stop loss methodology and rules had many positions closed out well before this latest leg down, preserving gains and mitigating losses. 
Two stocks from our October basket remain. Regeneron (REGN) is working on treatments for coronavirus and has been a standout stock. Chinese express delivery concern ZTO Express (ZTO) has held up relatively well. CVR (Celegene) (BMY-R) is a contingent value right from the Bristol Meyers Squibb acquisition. SPDR Gold (GLD) is our remaining Sector ETF position, which is benefiting from a flight to safety in this volatile market. Our Tactical Seasonal Switching ETF Portfolio is down 20.4% from our October 14, 2019 entry point following our October 11 Seasonal MACD Buy Signal. It has been helped by the QQQs. 
At this time it’s important to help others where and when we can. Kids will need more support in general and guidance to stay on task with their new distance learning systems (thankfully many are already familiar with these tools). We also need to check in with our seniors while we stay away. Our founder, inspiration and creator of the Stock Trader’s Almanac, Yale Hirsch is 96 and in a nearby nursing home. We had our first FaceTime visit on Wednesday. He looks healthy and in good spirits.
Yes, this time is different, but what history tells us about waterfall declines still provides a valuable perspective. Volatility is likely to remain high for the near future, but we all know this market will rebound and get back to new highs at some point. The question of course is how much it will rebound and when. 
This may be the fastest and most furious decline in stock market history, but in reality we have experienced similar declines, just not quite as rapidly – and not straight off a new all-time high. It’s impossible to know if we have hit bottom yet. By definition and nature bear market bottoms are only visible with a bit more hindsight. So speculating on the timing of a rebound, rally and recovery is not prudent. When we have a clearer picture on a bottom being in, we will be able to project what the next bull market may look like.
So let’s examine how this bear market stacks up with the history of declines of this nature and depth. The S&P 500’s 29.2% decline from the February 19 all-time high to the March 18 close is just under the average bear market decline of 33.1% since 1948 in the post WWII era. And it’s just about equal to the average bear market decline of 30.6% for DJIA listed in the 2020 Stock Trader’s Almanac on page 131 that uses the Ned Davis Research bull and bear market definitions going back to the year 1900. So the decline so far is average.
The velocity of the decline of near 30% over 28 calendar days is only matched by the 1929 and 1987 crashes. It took the market 25 years to reclaim the 1929 high through the depression and WWII. It took two years to reclaim the August 1987 high. Monetary and fiscal policies, as well as market systems, have come a long way since 1929 and 1987 and those crashes were outliers. This time could be an outlier as well, but the global response has been massive and we have learned a great deal since the outbreak became public in January. 
Massive fiscal and monetary interventions are in place and more is at the ready. The healthcare industry is being ramped up while local governments and communities shelter in place to stem the spread of the virus. Most importantly some existing medical solutions appear to have potential and the government is throwing all the support it can behind these potential therapeutic solutions. 
While this coronavirus situation is not like anything we have experienced before, the planet has survived a host of plagues and wars and humankind has thrived for quite some time despite it all. Our species has the ability to build on the ingenuity and wisdom of previous generation in an exponential manner. If we can go to the Moon and Mars and beat fascism we can beat this virus and come out of it stronger.
All that being said we suspect we are closer to the low than another major leg down and that we will end up with a V-shaped bottom and recovery. But the damage has been done and as we reported on January 31 when the January Barometer came in negative our outlook has diminished this year. After the Dow’s December Low was breached our March Outlook showed the disconcerting returns in years with a negative January Barometer when DJIA closed below its December closing low in Q1.
At this point Congress has already approved and President Trump has signed into law well over $100 billion in emergency funding with more likely to come. This is in addition to the approximately $50 billion that became available when President Trump declared a national emergency to combat coronavirus and changed requirements to speed up testing and care.
The Fed has shown it will pump virtually unlimited amounts of liquidity into the system. We have learned a lot over the years and society is pulling together to do everything in its power. Medical fundamentals are improving. The full force of United States Federal Government is being deployed. Barring an absolute worst case medical scenario where the whole country is infected a fairly brisk recovery is likely once the virus has been contained.
So stay safe and stay informed. Follow healthcare and government guidelines. Keep others calm and when this is over we will guide you back in the markets with our historical perspective, sound fundamental and technical analysis and our evidence-based tactical seasonal strategies.