We entered the new year with fresh economic momentum fueled by global central bank rate cuts and a tamping down of the trade war. Global markets rallied until mid-January, at which point news of a novel coronavirus outbreak in China emerged. Initially, the virus was believed to be confined to China, and U.S. markets continued pushing forward as domestic economic data improved. The S&P 500 hit an all-time high by Feb. 19.

Then it became clear the virus wouldn’t be confined within borders, as infections rose in Italy, Iran and South Korea. Today, there are infections globally, with the U.S. leading the world in confirmed cases. And as that reality began to bite, we tipped into bear market territory faster than any time in history. In just 16 trading days, the S&P 500 fell 20 percent before ultimately finding its low point (as of this writing) on March 23, 2020, down 34 percent.

We believe the underlying fundamentals of the U.S. economy were healthy heading into this unforeseen shock. That could help things get back on track a little more easily.

With no vaccine and no scientifically proven treatments, countries implemented social distancing as a first line of defense against the virus. That, as we now know, has led to widespread business closures and quarantining. Unfortunately, the remedy to limit exponential growth in new cases severely dampens economic growth. Case in point: U.S. weekly initial jobless claims posted their lowest levels since 1969 on Jan. 31 (201,000) and remained historically low on March 6 (211,000). Two weeks later, jobless claims on March 20 reached 3.3 million, which then doubled to a fresh 6.6 million new claims the following week. For context, the previous record for initial jobless claims was 695,000 in October of 1982.

Viewing the economic slowdown from a different angle, Moody’s Analytics noted that as of the final week of the quarter, 41 states had ordered some business shutdowns to stem the virus’ growth. That caused daily output at the end of March to fall roughly 29 percent from the first week in March.

To say that the virus took the market and policymakers by surprise is an understatement. Now, economists are aggressively rolling back economic forecasts and warning about the future of equity markets. While we believe data-driven economic forecasting has vastly improved over the years, we think this shock throws a wrench into even the most sophisticated models. At this point, we would take any economic forecasts with a grain of salt because we’re dealing with a virus. No one knows for certain how it will progress or how long current shutdowns will endure.