The black swan event that is COVID-19 has officially torn up the playbook on 2020 but investors encouraged by last week’s rally shouldn’t kid themselves that the worst is over, says Jim Cramer.
So what to do with this information? Cramer advises buying on the way down since you won’t be able to react fast enough when the market finally does take off.
The economic destruction wrought by the COVID-19 pandemic will take years to parse but in the immediate the numbers are stark: 6.6 million Americans filed for unemployment benefits for the last week of March, up from 3.3 million the week before.
In Canada, one million unemployment insurance claims for one week in March.
All told, the US numbers, where the pandemic has caused more documented infections than anywhere else in the world, came out larger than expected by economists are foretold of a worse picture for upcoming months and literally years. By comparison, in the midst of the (last) financial crisis in 2008 and 2009, jobless claims hit their highest in March 2009 at 665,000.
It’s those kinds of numbers that are driving the more gloomier forecasts for the markets, where many are more or less waiting for the other shoe to drop, said Cramer.
“It's just kind of a foregone conclusion it's going lower,” Cramer said on CNBC on Wednesday. “Once we beat this virus we could have a much bigger rally than the one we just had last week, but we're not there yet. We're not.”
“I can't be constructive yet. I'll get more constructive, when we give up last week's gains.
When we're retesting March lows, I think it's a better time to buy and I'll feel better when
we get close to actually bending the curve. The outbreak is still spreading at an exponential pace and we're a long way from the peak in infections. We need some time to pass.”
Cramer said there’s no sense in trying to time the market so as to buy stocks right before the big recovery.
“This will end,” Cramer said. “And when it does you won't be able to buy stocks at a discount because the market will turn into a rocket ship. That means you can't wait for the ideal moment to buy, you have to pick up stocks gradually on the way down.”
As reported by the CBC, the Conference Board of Canada has made estimates concerning the economic hit Canada could take depending on how long the outbreak lasts and thus how long the shuttering of businesses persists, saying that a six-week shutdown would trim Canada’s 2020 economic growth rate to 0.3 per cent, while a six-month-long shutdown would pull the economy into a 9.6-per-cent contraction, worse than the 8.7 per cent annualized decrease of early 2009.
Wednesday’s markets closed lower on news from the White House that the number of deaths from COVID-19 could reach 100,000. As of Wednesday, the S&P 500 Index is down 25 per cent since February 21, while the S&P/TSX Composite Index is down 26 per cent over the same period.