March was a really tough month. After a terrible February, all major stock indices were down by double digits, leading to significant declines for the quarter as a whole. All of the major indices ended the month and quarter below their 200-day moving averages, often a sign of more trouble ahead. Plus, even the safe asset classes (fixed income and gold), which often benefit from these sorts of declines, had troubles of their own in March. Like I said, it was a really tough month.

March was a terrible month for the financial markets, with the coronavirus driving the volatility. In the U.S., markets were down by double digits. Further, the economic damage began to emerge, with three million jobs lost in a week. In response, the government quickly stepped in with a $2 trillion stimulus package. The markets took comfort in these measures, showing a slight bounce at month-end.

In the past couple of days, I have gotten several questions regarding my assertion that there were signs that the spread of the virus has been stabilizing and even showing signs of improving. With headlines shouting about the rising number of cases and a health system under threat, the real question is, how can I make that statement?

Today, I'd like to provide an update on the coronavirus crisis, including how it has affected the economy and financial markets thus far. While case counts have gone up, the growth rate (a better indicator) has started to trend down in the U.S. Unfortunately, the economic damage has just started to appear, as evidenced by the three million new unemployment claims last week. The government has stepped in with a $2 trillion stimulus package, a move that led the markets to stabilize.

As expected, the initial jobless claims report—the one that shows how many people have been laid off and are newly applying for unemployment assistance—was a shocker this morning. Three million people lost their jobs and applied for unemployment last week. This is by far the highest number ever, with the previous record at just under 700,000 in 1982.

The Fed stepped up early and hard for the coronavirus crisis. It cut interest rates essentially to zero. It eased restrictions on banks to enable faster and more business lending. Plus, the Fed has taken unlimited measures to support the financial system as a whole, restarting programs from the last crisis to purchase bonds and inject money into the system. Unlike 2008, the Fed has been consistently ahead of the crisis, determined to choke any instability as quickly as possible before the medical crisis transmutes into a financial one. It largely looks like the Fed has been successful. The Fed and monetary policy have done what they can do so far, and they are poised to do more as needed.

Most of today’s headlines center around the rapidly growing number of coronavirus cases here in the U.S., with some comment on the fact that the number of cases in Italy also continues to grow rapidly. Occasionally, we also get a note that case growth in China has largely stopped.

We have spent the past couple of days first looking at the coronavirus pandemic itself and then at the likely economic effects. Which brings us to the third part of our discussion: market reactions. Now, we have the context to look at what has happened and think meaningfully about what might happen next.

Today, I'd like to share my framework for thinking about the coronavirus crisis, focusing on the virus itself, its economic effects, and the market implications. Viewed through this lens, it seems the virus is controllable, as seen in China and South Korea. Further, the widespread panic has been a positive, enabling governments to put effective restrictions in place.

Yesterday, we talked about how the coronavirus pandemic itself can be brought under control, and how in many countries it already has been. Here in the U.S., we are not there yet, but we can reasonably expect to get there in the next month or so. That is the good news.