The Month The World Economy Stood Still

Macro Tides Monthly Report 03 April 2020

The global economy ground to a virtual standstill in March as many countries invoked shelter in place orders for their citizens, major states in the U.S. followed suit, and the majority of service sector businesses were ordered to close their doors.

Please share this article – Go to very top of page, right hand side, for social media buttons.

The Composite PMI’s combine manufacturing data with the service sector, so they are an accurate reflection of what’s taking place in each country’s economy, or group of countries as in the EU. The decline during March was unprecedented and larger than anything experienced even in the financial crisis. Unfortunately, the data for April is likely to worsen, as many of the lock downs didn’t take effect until the second half of March.

The median estimate for GDP growth in the second quarter is -12.5% in the U.S. with a range from a decline of -8.0% to as much as -30%. These numbers are annualized so the Q2 contraction is expected to be between -2.0% and -7.50%. These estimates are shocking and it is easy to hope they are simply an overreaction until one contemplates the magnitude of what has just transpired.

As I noted in the March 12 WTR Special Update:

““In 2008 the financial system seized up due to a lack of liquidity and the banking system as whole was brought to the precipice of collapse. In 2008 the Federal Reserve could address the root of the problem by adding liquidity, which bought time for the rest of the economy to heal once the financial system stabilized.
The unemployment rate rose to 10.0% in October 2009 one year after the peak of the financial crisis before beginning a slow descent. Even when the unemployment rate was 10.0% the vast majority (90%) of American workers were still working, although 20% to 30% of workers were probably worried that their job might be at risk and probably curbed their spending for a period of time. But importantly the vast majority of workers were still employed and continuing to spend which certainly limited the depth of the economic contraction.”

The U.S. and global economy is experiencing a demand shock as even those with a job are precluded from going out to a restaurant, catching a movie, attending a family gathering to celebrate a birthday, rooting for the home team at a sporting event, shopping at a mall, or going out for a drink with friends.

The Federal Reserve has cut rates to 0% and flooded the financial system with more liquidity in the past two weeks than in 2008 and 2009, but trillions of dollars can’t provide a cure for what ails the patient. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES) which will create a safety net of $2 trillion for small businesses so they can survive the closure of their business, expanded unemployment benefits for those who are out of work so they can put food on the table and keep a roof over their head, and loans (not a bailout if the firms receiving the money pay it back) to Boeing, airlines, and other industries adversely impacted. But the CARES Act can’t provide a cure for what ails the patient. As Dr. Anthony Fauci put it so succinctly:

“You don’t make the timeline, the virus makes the timeline.”

China

China was the first country to buckle under COVID-19 and many economists are looking at China as being the first-in-first-out (FIFO), and are eager to seize any data point that suggests China is getting back to normal. Every recovery starts from a bottom which is why it’s worth noting that China’s starting point is lower now than in 2008 implying the journey back to real growth will take longer.

China Beige Book International is the largest private in-country data-collection network ever developed to track the Chinese marketplace and gathers real-time economic data from thousands of firms across all of China’s regions and sectors. The firm typically reports on the Chinese economy eight times a year, based on its surveys of 3,300 firms, but now reports weekly due to the quickly changing economic landscape in China.

According to China Beige Book International, revenues and profits have been contracting into March at a faster pace than ever, with services and retail industries the hardest hit but no sector has been spared. In other words there is no V-shaped recovery taking hold in China.

There are other factors at work that will impede a quick recovery. The global economy is still weakening so Chinese exports to the EU, U.S., and the rest of the globe are getting weaker and show no signs of improving yet.

Although exports as a percent of China’s economy have dropped from 35% in 2008 to a bit under 20%, they still are important. So a significant portion of China’s GDP will have to patiently wait for the rest of the world to heal before exports truly pick up.

As China’s dependence on exports and manufacturing fell from 46.2% in 2009 to 39.0% in 2019, services grew from 43.4% of GDP to 53.9% in 2019 according to Statista. This transformation resulted in a big increase in the middle class from almost nothing in 2000 to the largest segment in 2020 based on estimates by the McKinsey Institute.

The middle class has grown significantly since China was allowed to join the World Trade Organization in 2001. Democracies around the world, especially the U.S., hoped that China would become more democratic as its economy flourished, with more freedoms granted to a better educated and affluent middle class. Instead the Communist Party has throttled freedom and exerts an autocratic control over the lives of every person in China.

One of the things the Chinese Communist Party (CCP) does well is control the narrative of the message the Chinese people and the rest of the world receives. Right now the Narrative promoted by the CCP is that China is getting back to work. Mr. Miller from the China Beige Book International described the situation in China:

“It’s a narrative, and it’s clearly something Beijing is pushing, that China is back to work. They may be back, but they’re not back to growth.”

Li-Gang Liu, chief China economist at Citibank studied the aftereffects of the severe acute respiratory syndrome, or SARS epidemic in 2003. Once the virus was contained, manufacturing rebounded sharply, in a socalled V-shaped recovery.

Manufacturing will now be hampered by weak global demand, so no V-shaped recovery in 2020 for manufacturing.

Li-Gang Liu also found that in 2003 service industries, including hotels and restaurants took several quarters to fully bounce back. In 2003 services comprised a much smaller portion of China’s economy now, so services are more important than ever in China. But in 2020 consumers are reluctant to go out as many are still not sure it is safe to do so.

Daily passenger volume on subways in 6 major cities in China is down -37% from the same period in 2018 and 2019. Although some workers might be driving instead of taking the subway, traffic congestion is still well below the levels in 2019. With ridership down so much it seems reasonable to conclude that many workers are not back at work even though their employer is open for business.

There is also the issue of trust. Many Chinese people do not trust their government and who can blame them no matter how much the CCP controls the messaging. Some will choose to wait to see if their neighbors remain healthy after going out into public spaces with their safety mask on before venturing out to shop.

European Union

Germany represents 30% of the European Union’s GDP and economic growth during March in Germany plummeted. Consumer confidence lost in one month what it took 10 years to rebuild after the financial crisis in 2008.

Services represent more than 70% of Germany’s GDP and it wouldn’t be an exaggeration to say service activity evaporated in March.

Manufacturing is 22% of GDP and fell more in March than during a whole year of erosion in 2007-2008.

The human crisis in Italy is immeasurable and the economic stress is a compounding factor as Italy experiences its fourth recession in a decade. The banking sector in Italy could be the Achilles heel of the European banking system and will need aid to survive. Deutsche Bank is the fourth largest bank in the EU and its chart looks like DB is heading to $0.0. In contrast U.S. banks are in good shape, so if a financial crisis develops in coming months it will emanate from Europe. This is one of the great risks should the imposed shutdown of the global economy stretch beyond 4 to 6 months.

To minimize this financial risk an effort in coming months to boost economic activity within the EU through deficit spending throughout the EU will develop. There may be some resistance since the majority of countries within the EU do not have the capacity to increase their debt to GDP ratios or are near the annual cap for deficit spending.

Under the terms of the EU’s Stability and Growth Pact (SGP), countries within the European Union are supposed to keep their annual deficit below 3% of GDP and their debt to GDP ratio under 60%. Last November the European Commission (EC) chastised France, Italy, and Spain for not reducing their debt to GDP ratios while economic growth was good. The assessment was similar to a parent who attempts to correct a teenager by wagging an index finger at them for misbehaving. The teenager responds by rolling their eyes and then continues with the same behavior. These three countries are not alone as Greece, Portugal, Cyprus, and Belgium are also well above the 60% debt to GDP limit.

In 2020 France was projected to run an annual budget deficit of -3.1% and above the -3.0% ceiling, while Italy (-2.5%) and Spain (-2.3) were barely below that threshold. Germany comprises 30% of EU GDP but France is the second largest economy, followed by Italy, Spain and the Netherlands. France, Italy, and Spain, represent more than 45% of EU GDP, they will be limited in the amount of fiscal stimulus they can enact to spur economic growth if every country plays by the rules. But as economic reality bears down on each country and every country sees its economy contracting, a consensus will emerge and the EU will speak with one voice: “Rules? We don’t need no stinkin’ rules.”

While each of the 27 countries in the EU will launch a fiscal stimulus plan, it is unlikely the total will be equal to the size of the CARES Act as a percent of GDP in the U.S. And since the EU is made up of many different countries, the timing of each country’s program will vary, so the combined impact will be stretched out over time.

Supply chains have been broken within the EU as 12 of the 27 countries have closed their borders to other countries within the EU. So if a German manufacturer imports a part from Poland travel restrictions can prevent a truck carrying that part from entering Germany from Poland. All European automobile factories have been closed since March 21 to prevent workers from spreading the virus and because supply chains have collapsed. The dysfunction of the EU’s supply chain will depress economic activity further, until the shutdowns from COVID-19 have been lifted in all 27 countries, with each opening up separately. The travel bans have the potential to upset the flow of food and medicines throughout the EU, essentially creating artificial shortages that only add to the fear and misery.

Global Trade

When the global economy was enjoying synchronized growth in 2017, export growth was 5.14%, but growth slipped to 3.86% in 2018 as the initial impact of the Trade War between the U.S. and China took hold. Although data for 2019 is not yet available, export growth surely slowed more in 2019.

Trade has been one of the primary drivers in global GDP growth during the past 53 years. Exports as a percent of global GDP were 12.0% in 1965 and by the end of 2018 were up almost 150% representing 30.1% of global GDP. After peaking at 30.8% in 2008 the growth in exports as a percent of global GDP stalled. The increase in global trade and the globalization of supply chains during the past 20 years raised more than a billion people out of extreme poverty worldwide. The reduction in human suffering will slow as globalization is reversed.

Trade has played a significant role in the trajectory of the global economy since 1870, containing periods of major increases, setbacks, and stagnation. (Chart below) The First wave of expansion in global trade was undoubtedly aided by the mind boggling explosion in new technologies that became a reality by inventors all over the world between 1870 and 1914, as these new products were then exported.

The onset of World War I caused trade to contract before a modest recovery took hold during the 1920’s. The Great Depression led to a wave of protectionism led by the United States. The Smoot-Hawley Tariff Act was passed in June 1930 and increased the average tariff from 17% to 60%, igniting a response and a wave of protectionism around the world. The Tariff War in the 1930’s resulted in a 60% decline in global exports contributing to the Great Depression.

After the end of World War II the U.S. and its trading partners slashed tariffs, and the U.S. launched the Marshal Plan to assist in the rebuilding of Western Europe. Soldiers in the U.S. and around the world reentered the work force to build houses, cars, and all the goods a post war family needed. This spurred the Second large Wave in global trade.

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960 and in October 1973 a cut in production and an embargo of oil sales to the U.S. led to a surge in inflation and a deep slump in the global economy. Virtually overnight the price of oil quadrupled from $3.00 a barrel to $12.00, and a long recession overwhelmed the U.S. as GDP fell -0.5% in 1974 and -0.2% in 1975. Global GDP fell to 2.02% in 1974 and just 0.74% in 1975. Inflation soared for the balance of the 1970’s and didn’t peak until 1981. During this period of high inflation and high interest rates, the growth in global trade slowed.

A new wave of technological innovation in the 1990’s contributed to the Third major Wave in global trade until the financial crisis in 2008.The sideways trend in exports as a percent of global GDP since 2008 is likely a prelude to a decline in export volume in the coming decade. Although the ‘Trade War’ between the U.S. and China was resolved in December 2019, it disrupted supply chains and forced some firms to adapt by shifting production out of China to other low cost countries in southeast Asia like Viet Nam.

The ‘Trade War’ also caused companies to consider changing their supply lines to avoid any future spat between the U.S. and China and some will choose to make changes. The changes in supply chains by U.S. companies are likely to result in less global trade as some U.S. firms choose to simplify their chains by using fewer countries, and a few choosing to bring some of their production back to the U.S. The disruption to supply chains by COVID-19 in the European Union may compel European companies to simplify their supply chains wherever they can to lower trans-border risk within the EU.

China has become the dominant producer of drugs for the U.S. pharmaceutical industry, producing 95% of ibuprofen, 91% of hydrocortisone, 70% of acetaminophen, 40% of heparin, antibiotics, antidepressants, birth control pills, blood pressure medicines, cancer drugs, and countless other medications. Ninety percent of the prescription drugs consumed in the United States are generics, and the majority of them are produced overseas, mostly in India and China. China often provides the raw ingredients for medications that may be manufactured outside of China.

The U.S. has become overly dependent on China to provide medications that are critical to the health and welfare of Americans. Strategically, the U.S. will pressure U.S. pharmaceutical companies to reduce U.S. dependence on China by shifting their sources to other countries or by increasing production in the U.S. The pressure to make this change will develop after the current crisis with COVID-19 has passed.

Since 1870 global trade has diminished whenever economic growth has faltered as the focus of each country shifts to protecting their country and away from increasing trade with other countries, or during periods of world war, which is the ultimate protectionist behavior. The slowdown in the global economy as the world confronts a pandemic is likely to cause a deep contraction and a labored recovery after an initial rebound. The probability of a V-shaped recovery seems low irrespective of the historic monetary and fiscal stimulus and a reduction in world trade will prove just one of the headwinds.

United States

When the Trade War with China erupted in March 2018 the U.S. was somewhat insulated since exports are just 12% of GDP and manufacturing is 11%. That contrasts favorably with China that relies on exports for 20% of GDP and manufacturing for 30%. Germany was truly a victim of collateral damage as it derives 22% of GDP from manufacturing and 47% from exports. COVID-19 has turned the tables on those countries that rely on the service sector for most of their GDP.

The U.S. is probably at the top of the list since services represent more than 80% of GDP. The New York Federal Reserve has developed a timely Weekly Economic Index on high frequency data points rather than monthly data. The plunge that occurred over the past 3 weeks covered more ground than the 13 months it took during the financial crisis.

There are 164 million people in the civilian labor force and 158.7 million who were employed in February and 5.76 million people who were unemployed. Unfortunately, some 15 million workers may lose their job by the end of April. This would lift the unemployment rate from 3.5% in February to 13.0% in April and certainly above the high of 9.90% in 2010 after the financial crisis.

Updated forecasts by six major firms for GDP in 2020 show a consensus for a deep decline in the second quarter (-16.7%), with the third quarter expected to show a rebound of +9.4% and +4.6% in Q4.

In 2008 GDP fell -0.1% and was down -2.5% in 2009. The consensus average estimate for 2020 is for GDP to drop, -1.6%, which is significantly less than the contraction in 2009. No doubt this relatively benign outlook is being influenced by the size of the Coronavirus Aid, Relief, and Economic Security Act (CARES), which amounts to 9.3% of GDP compared to the 5.5% of GDP for Troubled Asset Relief Program (TARP) in 2009.

The CARES Act will prevent a depression from taking hold in coming months, but to assume that no real lasting damage to small business owners and consumers will emerge seems naïve. As noted in the March 16 Weekly Technical Review many small businesses weren’t profitable even while the economy was doing well:

“A 2019 report by the JPMorgan Chase Institute looked at 1.4 million small businesses and found 29% of the businesses in a typical community were unprofitable, and 47% had less than two weeks of cash liquidity.”

The Small Business Administration defines a small business as any company with less than 500 employees, and in 2018 there were 30.2 million that met that definition. Firms with fewer than 100 employees account for 98.2%, and those with fewer than 20 employees account for 89%. These statistics illustrate how besieged the SBA could become in the next few weeks.

The JPMorgan Chase Institute report suggests that many small unprofitable businesses may have some difficulty in getting an SBA loan, or the owner may simply decide the hassle of running an unprofitable business is just not worth it anymore. I have no idea whether 5%, 10%, or more of small businesses never reopen, despite the availability of funding, but I’m certain that it won’t be zero percent. Even during good times almost 50% of small businesses fail within 5 years and the COVID-19 shut down is a knockout punch no small business owner has ever experienced.

For these 2020 GDP estimates to come to pass the safety net for unemployed workers will have to be rolled out in a timely manner, the $349 billion in SBA loans to small businesses must happen quickly, and most importantly the shelter in place order be lifted on April 30.

State unemployment workers have been overwhelmed with the avalanche of filings but will gradually catch up, even if this delays when some workers receive their first unemployment check. The same processing curve will apply for businesses applying for a loan from the SBA. It may be a frustrating nightmare for the unemployed and small businesses dealing with the morass of government paperwork, hours of being on hold waiting to be helped, and an extended period of anxiety until the first check appears, but it will get done.

Virus Timeline

The real risk to the somewhat rosy economic outlook for 2020 is the virus itself. As Dr. Fauci has said,

“You don’t make the timeline, the virus does.”

The assumption embedded in what could be the too optimistic estimates for GDP in 2020 is that life as we knew it will return to ‘normal’ on May 1 after the shelter in place order expires. It is assumed that the number of infections will peak in mid April and then trend lower making possible for everyone to get out, get going, and spend, spend, spend.

I’m not an epidemiologist but I have been listening to Dr. Fauci, Dr. Birx, and Dr. Gottlieb closely.

On Sunday March 29 President Trump made it clear that he had been convinced that a regional reopening of the country was not a good idea and would not be pursued, since it risked a further spread of COVID-19. President Trump also confirmed that Dr. Fauci and Dr. Birx had convinced him that social distancing was our best hope in limiting the number of infections and deaths. Without social distancing the models indicated that between 1.6 million and 2.0 million deaths could occur.

If every American did their part, the number of fatalities might be 100,000 – 200,000 which was the best outcome. However, the U.S. didn’t impose a national social distancing policy as a number of other countries did. Rather than one infection peak that encompasses all the U.S., there will be a rolling number of peaks as the infection rate for each state tops. New York is expected to hit its peak by mid April, roughly 3 weeks after New York implemented its statewide rules for social distancing on March 20. However, Texas and Florida waited until March 31 and April 1 and Florida exempted religious services, which will lead to more infections and make it less effective.

The University of Washington’s Institute for Health Metrics and Evaluation, or IHME has produced projections very similar to the administration’s findings, according to Dr. Birx. The IHME’s model forecasts the outcome for each state by taking into account not just which measures state officials have imposed, but also the date on which officials imposed the measures and how much transmission was already underway by that point, as measured by the number of COVID-19 deaths.

The model also considers how strict the measures are, with the greatest weight given to states that have imposed all three of the following options: closing educational facilities, closing nonessential businesses, and issuing stay-at-home orders. The model is then adjusted based on what portion of a state’s residents those various rules have been applied to and whether the measures are limited to certain cities, counties, or the entire state.

Based on the latest available data (April 1), a total of 93,531 COVID-19 deaths (range of 39,966 to 177,866) are currently predicted through the epidemic’s first wave. Potentially the biggest unknown in the IHME’s model forecasts is the level of adherence to the rules by each person in the U.S.

Notice IHME’s reference to the epidemic’s first wave. The IHME’s projections assume full social distancing through May 2020:

“Our rough guess is that come June, at least 95% of the U.S. will still be susceptible. That means, of course, it can come right back. And so then we really need to have a robust strategy in place to not have a second wave.”

The most robust strategy is to maintain full social distancing through May 31 for the whole country to limit the risks of a second wave of infection. In the Spanish Flu epidemic in 1918 and 1919 there was a second wave which resulted in more infections and more deaths, as soldiers returning home from World War I quickly infected almost 30% of the world’s population. It is estimated that between 25 million to 50 million people died from the Spanish Flu epidemic. Sydney Australia is one example.

The average annual flu has a R0 value of 0.1%. The R0 value for COVID-19 is 2.2%, which means each infected person will infect an additional 2.2 people. COVID-19 is more than 20 times as infectious as the annual flu which explains why Dr. Fauci has emphasized the important and value of social distancing.

In an April 2 interview on The Today Show Dr. Fauci noted that there was so much that is unknown about COVID-19, especially in understanding why it hits some healthy people so hard and others are asymptomatic and feel fine. It has been estimated that up to 80% of all infection transmissions are from those who are infected but are asymptomatic. This is another reason why the shelter in place order is likely to be extended to at least May 30, so more people can be tested and identify those spreaders.

Ultimately, every American will need to have two tests. The first test will verify if they are currently infected so they can be isolated, since so many people are asymptomatic. A second test will be administered to those who have recovered from COVID-19 to determine if their body has begun to produce antibodies specific to COVID-19.

Those who have been infected, recovered, and have antibodies could reenter the workforce knowing they would not infect others. Workers who have passed both tests could be given an Immunity Certification by the government. This would help medical personnel work be able to work with infected patients knowing they would unlikely contract the disease again.

On April 2 the FDA approved the first company to begin producing the antibody serological test, which uses a finger prick of blood and a small strip to determine the presence of COVID-19 antibodies. Identifying people who have recovered from COVID-19 would allow research into convalescent plasma therapy. Researchers are launching trials that involve the transfusion of blood from people who have recovered to those who are sick in hopes it will spur the creation of antibodies in the sick patient. If successful, convalescent plasma therapy could lower the fatality rate and shorten the recovery time.

The amount of testing that needs to done and the development of an effective convalescent plasma therapy will not occur by the end of April or May, and a vaccine will not be available for at least a year. Containing the spread of COVID-19 will not be achieved by April 30 or the end of May, even if the infection rate has peaked and is falling. Suspending the shelter in place rule will require balancing the damage to the economy and the mental health of many Americans, versus the risk of incurring a second wave of infections.

Whenever the shelter in place order is rescinded there is a good chance people will be told it is mandatory to wear some type of mask that is not a medical grade mask that could be used by health care providers. Anything that can lower the risk of transmission will be employed, so more workers can become employed. Imagine that people will be able to go into a bank wearing a bandana and be welcomed!

After the SARS epidemic in 2003 and H1N1 in 2009, Asian countries learned that wearing a mask lowered the infection rate and now there is no fashion stigma for wearing a mask.

Based on recent data the number of COVID-19 infections is much lower in countries in which the population wears a mask.

This transition will occur in the U.S. and one of the real signs that it has become accepted will be when Cosmopolitan’s cover shows a woman wearing a mask with a caption that reads ‘Wearing a Mask is Now Sexy’.

If the shelter in place rule is extended from April 30 to May 31 or beyond, GDP estimates for 2020 will be revised lower as will S&P 500 earnings. I’m not sure the stock market has priced in this risk, which is another reason why a retest of the March 23 low of 2192 seems likely. This has been discussed in a number of WTR’s showing history suggests that a retest of that low is likely.

Given the magnitude of the economic contraction and the lack of visibility of when a recovery can be expected only increases the odds of a retest.

Sometimes a narrative can prove to be such a strong elixir that it can overwhelm what should be obvious. After the Federal Reserve expanded its balance sheet from $900 billion in 2007 to $2.5 trillion in 2011, a narrative developed that the increase in the Fed’s balance sheet would ignite hyper inflation. On the surface this was easy to embrace and investors believed it, which is why Gold rallied from $1,045 in February 2010 to $1920 by September 2011.

At that point bullish sentiment exceeded 90% bulls even though inflation wasn’t really picking up as expected for one simple reason. Although the Fed had almost tripled the size of its balance sheet, most of the money was sitting in the banking system in the form of free reserves. Free reserves held at the Federal Reserve totaled $1.62 trillion in July 2011, so almost 65% of the increase in the Fed’s balance sheet was sitting at the Fed doing nothing.

The simplest definition of inflation is too much money chasing too few goods which causes the price of goods to rise. The premise behind the hyper inflation narrative was not supported by the real world, but that didn’t keep investors from jumping on the Gold bandwagon. After peaking at $1920 in September 2011 Gold plunged to $1525 in December 2011, before a rally recorded a lower peak of $1792 in February 2012, followed by another drop to $1525 in May 2012.

Gold rebounded and reached a high of $1795 in October 2012, which represented the second failure to breakout above $1800. Even if one still believed the narrative of hyper inflation, the technical action in Gold was sending an important warning, which was delivered in April 2013 when Gold collapsed below $1525. This is another good example of why combining fundamental and technical analysis is so helpful.

The current narrative that the combination of unprecedented monetary and fiscal accommodation will revive the economy sooner and spur a strong second half rebound is powerful and a view most investors hope will develop. I don’t share that view. Since the financial crisis investors have been taught the stock market always goes up when the Fed is expanding its balance sheet.

No one has ever experienced the economic fallout from a global pandemic, and human tendency is to go with what we know. Although unlikely, it is possible there won’t be a retest as investors rush in to buy before the S&P 500 gets back to 2192, because they don’t want to miss out on the big rally they are sure is to follow based on unprecedented monetary and fiscal accommodation.

Ironically, it may be more bearish in the long term if the S&P 500 drops to 2360 (near the December 2018 low of 2347), and then rallies to 2750 – 2800. This rally could be spurred by a peak in infections in New York, just as investors bought Gold in anticipation of hyper inflation.

As noted, other states will experience their peak in the weeks following New York, and the end of the shelter in place order won’t be removed while infections continue to mount, and probably not until at least two weeks have passed with few if not zero infections. A failing rally to 2750 – 2800 would potentially set the S&P 500 for a decline that could bring the S&P 500 down to 2030, which is the 50% retracement of the rally from 666 in March 2009 to the February 2020 peak of 3393.