The Afternoon Audit
4.9.2020

Market Slowly Climbs Higher, but Indicator Show Volatility is Coming

Today in the Market

• US equities finish in the green represented by major indices

  • DOW +1.22% | NASDAQ +0.77% | S&P 500 +1.45%

Volatility in on the Horizon

• After digesting many credible opinions, the outlook at the market appears to be very two-sided

• Jim Paulsen, Chief Investment Strategist at Leuthold Group, mentioned that the rebound from this recession could come at "warp speed", matching the historically steep sell-off

• On the flipside, damage from the pandemic and economic effects of the quarantine guidelines had been hard to accurately gauge, as the recent rally has been backed by dangerously small amounts of positive economic data (see yesterday's post below)

• https://mailchi.mp/8cb74a62c37e/us-stocks-rise-trump-clashes-with-watchdogs-stay-at-home-investment-opportunities

Looking Ahead

• As bullish investors have begun to buy again while bears argue a very ugly worse-case scenario, this discrepancy implies volatility will come

COVID-19 Pandemic Investment Outlook Update

Start-Up Layoffs

• Younger companies continue to downsize and reduce expenses as they worry the demand for their products and services will not resurface in the short-term

• Among those making cuts are:

  • SpotHero (public parking)

  • Thumbtack (small business marketplace)

  • AngelList (jobs board)

  • ZipRecruiter (jobs marketplace)

  • EZCater (corporate catering)

  • Eden (office management)

  • Kabbage (small business lending)

  • Away (luggage maker)

  • Toast (restaurant tech)

Why it Matters

• Small businesses are important, employing almost half the nation's workforce, which explains their status as a target for government stimulus spending

• Due to lack of scale economics, business uncertainty, unstable / negative cash flows, and high pressure from investors, they are often the first to go under in market downturns

• Small business constitutes an adequate sample size to be reflective of the broader economy

What it Indicates

• These layoffs give insight to which sectors are being hit the hardest

  • transportation, restaurants, hiring platforms, etc

• Other notables:

  • retail vendors offering large items, such as furniture, among others, will be hit hard due to particularly high shipping costs e-commerce environments will require

  • the government aid could put small business lenders out entirely out of business

  • small company failure will leave any unfilled holes for similar players to take advantage of once things return to normal