The U.S. stock market assembled a roaring open on Monday, and the Dow Jones Industrial Average (DJIA) skyrocketed nearly 800 points.
As the coronavirus pandemic appears to be stabilizing, billionaire investors are edging back to the stock market. Pershing Square’s Bill Ackman struck a hopeful tone:
I am beginning to get optimistic. Cases appear to be peaking in NY. Almost the entire country is in shutdown. Hydroxychloriquine and antibiotics appear to help. There is increasing evidence that the asymptomatic infection rate could be as much as 50X higher than expected.
Billionaire Bill Gates also weighed in, saying the final death toll will likely be lower than Trump’s 100,000 – 250,000 estimate.
If we get the testing fixed, we get all 50 states involved, we’ll be below that. Of course, we’ll pay a huge economic price.
The Dow Jones led a huge stock market recovery on Monday, rising 780.28 points or 3.71% to 21,832.81.
Investors grew optimistic as New York governor Andrew Cuomo said the state is approaching the apex of the coronavirus curve. With a possible end in sight, talks may begin to pivot to easing lockdowns.
The S&P 500 and Nasdaq rallied 3.52% and 3.36%, respectively.
Bill Ackman’s optimistic statement is a sharp U-turn from two weeks ago. In a doomsday interview with CNBC, he said “hell is coming” and urged Trump to shut down the entire country.
America will end as we know it. I’m sorry to say so, unless we take this option. We need to shut it down now. … This is the only answer.
Ackman then came under fire as it emerged he profited $2.6 billion just days later from a bet against the market. He has since redeployed those profits back into distressed shares of Hilton, Starbucks, and others. Ackman now envisions a world where we cautiously go back to work with a base level of immunity.
The severity and death rate could be much lower than anticipated, and we could be closer to herd immunity than projected.
Explaining the swift pivot, Ackman told clients that stock prices look tempting after such a large drop.
We became increasingly positive on equity and credit markets last week, and began the process of unwinding our hedges and redeploying our capital in companies we love at bargain prices.
Ackman also said the massive stimulus packages from Congress and the Federal Reserve provide a solid backstop for the economy. After pumping trillions into the market, Ackman sees a stable footing for the markets to move higher.
Massive stimulus is being injected globally to backfill the economy and bridge us through the crisis. Most corporations, banks and consumers entered the crisis reasonably well capitalized. Rates are extremely low. There is no housing or commercial real estate overhang.
We have to open our country again. We don’t want to be doing this for months, and months and months.
Microsoft founder Bill Gates also brought hope to the market, suggesting that total deaths could be much lower than expected. If every state adheres to strict social distancing, he said, the death toll may stay below 100,000.
The updated model from healthdata.org, which the White House used to predict fatalities, now estimates deaths below 100,000.
The pandemic should reach its peak in the U.S. on April 16th, according to this model. However, this relies on strict lockdown measures through May 2020.
Last modified: April 6, 2020 1:40 PM UTC