U.S. Treasury Secretary Steven Mnuchin said he was pressing ahead with the Friday launch of a $349 billion coronavirus rescue loan program for small businesses. This comes after conceding to bank demands as an effort to fix aspects of the program which banks claimed could cause participating lenders legal and financial risks.
Mnuchin stated that the SBA application system would be “up and running” by Friday and encouraged businesses to go to lenders to apply for loans. However, he also acknowledged that not every bank would be in a position to start processing applications right away.
“You get the money, you’ll get it the same day, you use this to pay your workers. Please bring your workers back to work if you’ve let them go,” Mnuchin said.
Where Does Market Optimism Fall Now?
Even as the spread of COVID-19 accelerates in many regions of the U.S., institutional investors are becoming ever more positive about the prospects for the stock market, according to a survey released Thursday by RBC Capital Markets.
“Our respondents are highly bullish on stocks, the most optimistic they’ve been since we started our survey in the first quarter of 2018,” wrote Lori Calvasina, the head of U.S. equity strategy at RBC Capital Markets.
She mentioned that the survey respondents provided three reasons for optimism including attractive valuations, faith in the Federal Reserve to take necessary pro-economic actions and “a belief that the economic damage from the public health crisis will be manageable.”
The survey gauged the opinions of 185 institutional investors over the week ending Tuesday. It showed that most respondents think the stock market has yet to hit a bottom. More than two-thirds predict that the S&P 500 index will hit its lowest point above the 2,100 level.
Meanwhile, 78% of respondents said that “a decline in new coronavirus cases is needed for the equity market to stabilize,” indicating that most do believe that decline will begin before the end of June. A majority of respondents also said they believe that “business life will go back to normal” before the end of September.
What Is Warren Buffet Up to During This Crisis?
It’s not shocking to hear that all eyes are on Warren Buffet right now.
How is Berkshire Hathaway doing?
If the stock market goes up, that should be great for the stock. Berkshire has investments in Bank of America, Goldman Sachs, various airlines, and other companies sensitive to the economy.
The multinational conglomerate held just over $250 billion in publicly traded stock as of Dec. 31, and is currently nursing about $100 billion in paper losses on these just from the recent crash. So if there’s a swift recovery, you can expect Berkshire stock, which has fallen from $230 to $176, to go back up quite quickly.
And even if the coronavirus crisis goes on and economic distress gets worse and worse, the company has a gigantic cash hoard of $125 billion it can use to snap up investments at bargain-basement prices. (That, put simply, is worth about $50 for each Berkshire Hathaway “B” share.)
That’s how Buffett has made big bucks in the past, including the bear market of 1974 and the financial crisis of 2008. “Be fearful when others are greedy,” he famously advised, and “be greedy only when others are fearful.”