The latest print of economic data shows how the U.S. economy is getting crushed by the coronavirus pandemic. But one top market strategist says the conversation has to shift “from the war against the virus, to how are we going to reopen.”
Peter Tchir, Head of Macro Strategy for Academy Securities tells Yahoo Finance, “These numbers are so bad, I think it's got to wake up politicians and say, ‘Hey, we've got to be careful, but at the same time we can't let the economy get completely crushed.’”
On Wednesday the Dow (^DJI) lost 445 points and the S&P 500 (^GSPC) also ended lower following a record plunge in retail sales. U.S. manufacturing production recorded the largest drop since 1946.
Wednesday’s sell-off erased much of the previous day’s gains as state governors begin talks to coordinate reopening plans.
[Read more: Stock market news live updates: Stocks fall after grim economic, earnings data]
‘The punishment on the financial sector as a whole has been too much’
Major banks which announced earnings this week have seen their quarterly profit plunge as they set aside billions in reserves for credit losses amid a recession.
The financials ETF (XLF), recently battered against a backdrop of zero interest rates, was trading lower on Wednesday.
“I think the punishment on the financial sector as a whole has been too much,” said Tchir.
“People underestimate how much trading profit can be made. I think the bank balance sheets are going to be fine,” he added.
He suspects the banks took the opportunity to take more write-downs than necessary. “If we get any sort of recovery at the end of Q2, start of Q3, then look for good bank earnings,” said Tchir.
‘We really have to work on supply chain repatriation’
Investors are trying to figure out what the economic landscape will look like once the pandemic is over.
“We really have to work on supply chain repatriation and a big infrastructure spending,” said Tchir.
In late March and early April, states were pleading for medical supplies such as masks, gowns and ventilators. U.S. companies rushed to pivot their businesses and make supplies.
In one of his daily briefings, Governor Cuomo of New York called the states’ dependence on medical supplies from China “one of the cruelest ironies.”
“One lesson we've all learned is whether China is a good actor or a bad actor, having so much of your supply chain depend on China, especially for medicines, is not a good idea,” said Tchir.
[Read more: Coronavirus: Personal finance tips, news, policy & more from Yahoo Finance]
Ines covers the US stock market from the floor of the New York Exchange. Follow her on Twitter at @inesreports.
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