Waiting for the Coronavirus Peak

The COVID-19 pandemic has severely affected the U.S. economy, with containment efforts leading to widespread business closings and surging unemployment—and stock market volatility. The key questions now are when can the economy reopen, and what happens when it does?

Shutdowns have rocked U.S. stocks and economy

Large sections of the U.S. economy remain shut down in an effort to slow the spread of COVID-19, and the ripple effects are increasingly being felt. Nearly 22 million Americans filed for unemployment benefits during the three weeks ending April 11th. Because of reporting lag times, the monthly U.S. employment report hasn’t yet fully reflected the severity of the situation.

Initial unemployment claims have shattered records

Source: Charles Schwab, Bloomberg, as of 4/16/2020.

Meanwhile, corporate earnings estimates are more of a guess than anything. Analysts were relatively optimistic at the start of the year, but have since sharply dialed back expectations, with more estimate reductions likely. Many companies have withdrawn guidance, making valuation analysis exceptionally difficult.

Earnings optimism has faded considerably

Source: Charles Schwab, I/B/E/S data from Refinitiv, as of 4/16/2020.