“With an anomalously low testing rate the U.S. will as a consequence suffer a high headline death rate, although the true death rate will be no worse than elsewhere. The big death rate headlines will likely hit consumer confidence very hard indeed and deepen an already likely deep recession and equity market collapse, potentially causing a significant backlash against the current U.S. administration. These are dangerous times indeed.”

‘Close to’ Bazooka
“While the market may have been disappointed that Trump did not break out the bazooka last night, the reality is the Fed came close to doing that today -- though the market remained unimpressed,” said RBC Capital Markets LLC economists Tom Porcelli and Jacob Oubina. “They promised to do $500 billion each in 1-mo and 3-mo repos for the foreseeable future and they are going to expand Treasury purchases beyond bills. For a market focused on liquidity issues, this is good first step. We continue to hear that liquidity is terrible in off-the-run Treasuries so by expanding their purchases beyond bills, they no doubt hope to alleviate that issue. The problem is, spreading around the $60 billion in monthly purchases they were already making may not be enough. We think this is just the beginning.”

Right Conditions
“Market sentiment will remain jittery in the near term as the Covid-19 outbreak continues to accelerate in the U.S. and Europe,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “As we have experienced in China and other parts of Asia, the right policies to contain the outbreak should work but this involves some sharp, short term pain. We are likely to go through such pain in the weeks ahead in the U.S. and Europe.”

“For markets to be less anxious, we need to see the number of new infections stabilize, as we did with China (since mid-February) and South Korea (in recent days). We also need to see fiscal and monetary policy support implementation. Hence, we are not looking at specific time or valuation to advise investors to add back equities, but instead we are looking for the right conditions.”

EM Outperformers
“We no longer recommend investors overweight emerging-market equity positions relative to euro-zone stocks” after outperformance by EM in recent days, said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Safety Beats Everything
“There’s a whole host of uncertainties out there and markets aren’t sure that the policy measures they have seen so far are coherent, cohesive and coordinated enough to tackle what’s at hand,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “It’s beside the point that we’ve gone into an area where valuations are attractive until the fright stabilizes and is alleviated. It’s difficult for markets to be convinced to be taking the risk in catching falling knives.”

Liquidity Constraints
“Despite the recent injections of liquidity from major central banks, they are not flowing into Asia,” said Eugenia Fabon Victorino, head of Asia strategy at Skandinaviska Enskilda Banken in Singapore. “As Asia braces for tighter USD funding, long USD/Asia seems to be the way to go. The dollar index continues to gain ground, re-emerging as the ultimate safe haven..”

Recession Pricing
“The fact that we saw gold -- typically a safe haven asset -- decline almost 4% during the session to below $1,600 levels suggested a ‘reach for liquidity’ moment for investors,” said Eli Lee, head of investment strategy at Bank of Singapore. “Investors also expressed their firm preference for the safety of the U.S. dollar yesterday. The USD broadly appreciated against Asian currencies, even against the safe-haven Japanese yen.”

“The equity markets have by now priced in at least a technical recession lasting two quarters, in our view. The larger question is whether we could see a longer fundamental recession.”

An Optimist’s Take
“The market needs to see clear signs of a peaking of patient count globally, especially in the U.S. and Europe,” said Satoru Matsumoto, a fund manager in Tokyo at Asset Management One Co. “Given the track record in China, I am hoping that we may see some light at the end of the tunnel by early next month.”