Stocks tumble as Trump warns of 'very painful two weeks'

Delancey Strategies President Jared Levy joins Yahoo Finance’s Seana Smith to discuss his outlook on markets as coronavirus cases in the U.S. soar past 199k.

Video Transcript

SEANA SMITH: Worst-performing sectors both off over just around 7%. For more on today's market action, I want to bring in Jared Levy, Delancey Strategies president.

And Jared, when we take a look at what's been going on in the markets, investors are struggling to make sense of what we've seen over the last couple of weeks and what we can expect, at least in the short term. Are you-- from where you stand, do continue to be cautious? Are you cautious? Or do you think we will likely-- and retest those recent lows that we've seen?

JARED LEVY: Yeah, it's-- and by the way, great to be with you-- obviously a very different time, you know, we're in right now. And I think a lot of the traditional models kind of go out the window. You know, I think you'd be a fool if you're not cautious here, right? And anything I'm looking at, everything comes with a caveat, right?

So I've got sort of my-- my main case, my bear case, my best case. In every single one of those, I've built in some sort of tail risk. But my tails, my black swan events, are really easily capable of happening, which is kind of scary. So the short answer to your question is, yes, I remain cautious here.

I think the markets are reacting in actually a positive way. I mean, you look just a couple of years ago, markets were selling off not as dramatically, but about half as much when a small country, Greece, you know, about the economy-- I think it's of Iowa, similar GDP, was affecting global markets. And here we have something that's truly affecting global markets and economies, shutting economies down, and there's a sense of optimism.

And again, I don't know, and maybe that's just the-- you know, the humanitarian, the underdog kid believing that this thing can pull through. And I think we will, but I think market participants are saying, you know what? All right, there's some pain to come here, but we will overcome this. We will get through this. Obviously, the question is, what sectors are going to be hit the hardest? And that's where the answers are difficult to come by.

SEANA SMITH: Yeah, Jared, it's interesting because we got some-- some of the data out this morning. US factory activity contracting in March, orders tumbling to an 11-year low. When you take a look at that, do you think this downturn, then, could last for a while? Because like you said, it's hard to determine when we'll see the economy turn a corner and when we'll see a trend in the upward trajectory-- upward direction. And right now, it seems like that could be limited, at least for the foreseeable future, due to some of that anxiety that's out there at this point.

JARED LEVY: Yeah, it's hard. I was having a conversation with a couple CEOs. I gave a talk last week. And we were just saying, you know, all right, so you've laid off a good portion of your workforce. What happens when this blows over? You know, do you put all of those folks back to work? Do you start producing at the level you were before?

Every single one of-- one of them obviously said, well, no. You know, we're going to scale in as much as we can. We want to bring our folks back to work. But unless the demand is there, you know, a lot of these factories and a lot of these-- I mean, look at Macy's. Even the retailers are not going to just flood back in with the same amount of employees and the same amount of production they had before.

So really, it's two things. A, when we get back to production, what does that look like? What's the confidence look like? You know, and then B, you know, how are-- how are the consumers feeling, business confidence? How are consumers feeling, you know, when we get back to work? Are they--

Remember, they're drawing down their savings right now. You know, even me, I'm spending probably 4, 5, 6 times what I was just two months ago. You know, I've got nannies in the house. I've got-- I'm ordering in, you know, five, six nights a week. I mean, my expenses have skyrocketed, you know, and I'm not-- I'm smart with my money in some ways and not in others.

For those folks who aren't as fortunate as me, you know, they're really tearing into some deep, deep savings here. So the question is, are they going to be able to spend? Are they going to want to? And I think that's going to create pause. You know, retail is going to suffer. Obviously, you know, auto sales, production, things like that are going to suffer. The question is, how much? And again, that's all sort of gray. Earnings will help us, at least get some more opinion there.

SEANA SMITH: Jared, do you think at least-- Well, we're getting close to earnings season, and I know you're saying that you were talking to some CEOs recently. But do you think earnings season will help us get a little bit more clarity just in terms of what corporations are seeing, what they are expecting to see, over the next couple of months, and then what we could likely expect to see there?

JARED LEVY: Yeah. So the numbers are going to be dirty, right? Don't-- don't look at the numbers. Most analysts are going to throw this quarter out because, I mean, what can you measure to? What can you compare it to, whether it's down 100%-- 80% from last year, you know, or 30%? That doesn't matter.

What we're going to want to hear is, A, you know, what are executives doing? What are the teams doing? What are they feeling? What are they hearing? Because obviously, they've got-- You know, from-- from the top down to the folks that are, you know, dealing with all the consumers, what are they hearing on the Street, and what are their plans for the future?

And I think forget the numbers. Listen to these earnings calls, you know, in detail, and especially, you know, the folks that are in charge of a lot of our transit, you know, the FedEx, UPS. I want to hear what they have to say. Obviously, Amazon's struggling with-- with keeping their employees safe and employment there and keeping folks happy and safe. I mean, there's all these sort of questions.

So I think that will yield a ton of information, but again, you're going have to read between the lines. And it's going to be a lot more difficult because usually you look at the numbers, we get some highlights, and we go on. Now it's going to be like digest, digest, digest, and really analyze what the state is. And a lot of it's going to be subjective. That's the thing.

SEANA SMITH: Yeah. Jared, it's interesting because we've been trying to digest the recent data that we've gotten out and then one of those being those unemployment claims number. So we got the staggering number last week, 3.3 million. The expectation for this week-- it could rise more than 5 million.

Bank of America was out today saying that they expect jobless claims to hit 5 and 1/2 million. What are you expecting to see there? And when we drill down into that number, I guess when we're trying to parse through what exactly it means for the future of the economy here, how many of those are furloughed workers versus actual jobs lost?

JARED LEVY: Right, and again, that's the question of, how do we-- how long does this thing go on? And Seana, I think the key here is, the longer we stay shut down, the more exponential risk we have. So day by day, if you will, the longer this things goes out, in my mind, past, like, April 20, April 30, then it becomes, you know, much more difficult to sort of say, all right, the folks that have been furloughed, yeah, a good portion are going to come back.

So my models sort of say, OK, if-- I'm just putting this number out there-- if 10 million people have lost their jobs by April 30, let's assume at April 30, if we turn back on, or May 1, 80% of those come back. If that gets pushed out to May 15, maybe it's 70%. Right?

And then as we go further out, I think a less-- less and less folks are going to return to work. Why? Because remember, the bills don't stop. And while there are agreements in place now-- I'm sure people are working with, you know, their landlords. Companies are working with their landlords and with their creditors and debitors-- and, you know, I mean, all of this stuff-- that can only go on for so long. The buck can only sort of be shuffled for so long.

So I'm looking for some pretty nasty numbers. I think that most of the Street expects to see, you know, easy double-digit unemployment in the US. I mean, there's been talk of, you know, 30 million unemployed, 35 million unemployed Americans. I think we're sort of prepared for that. But like you said, it's going to be, OK, how many of those folks come back? And I think that's a question, again, that is dictated by time.

SEANA SMITH: All right, Jared Levy, president of Delancey Strategies, thanks so much for taking the time to join us this afternoon.

JARED LEVY: Thanks, Seana.