On March 18, China reported that new coronavirus cases had nearly reached zero. I marked “Market Bottom” on my calendar. It took a few days for the news to register — China’s credibility was in question — but the announcement indicated a path forward for defeating the virus. By March 23, the market reached its first bottom.

Note: I said “first” bottom. After an initial rally in a bear market, there is usually a secondary decline. Sometimes this dip even undercuts the prior low. In this case, a premature reopening by states could be the trigger. Still, the main case — that the virus can be defeated with today’s tools — remains intact. We expect continued innovation, and the secondary dip is likely to be brief and based on recycled headlines.

From an investment standpoint, any time after the rally begins is a good time to build positions. Encouragingly, some economic indicators began recovering in April — before lockdowns were eased. Cash in money market funds has surged by $1 trillion this year, reaching $5 trillion — likely waiting to be deployed.

Remember, the stock market doesn’t measure today’s economy. On average, it looks ahead about four months. Interestingly, that’s how long it took China to go from its first case to effectively zero.

On our buy list, seven names top the rankings. All are industry leaders. This was not intentional, but it’s not surprising: leading companies benefit from economies of scale — paying less for purchases, commanding more for sales. These advantages often lead to stronger shareholder returns, larger buybacks, and robust growth.

Some politicians, economists, and advisors remain skeptical of share buybacks. Yet data shows that companies engaging in buybacks also reinvest more in their businesses than those that don’t.

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