Mid April Update - 2020
It's an understatement to say that a lot has happened in the past 2 weeks and information is coming at us in every direction. As today would be the traditional tax-filing deadline (which has been pushed back to July 15th) we wanted to get some updates out to our clients. On that note, keep in mind that the IRA contribution deadline for 2019 has been extended to July 15th as well.
While we're not out of the woods yet, we'd like to touch on some positive news and progress being made in certain areas:
- The Fed has thrown everything including the proverbial “kitchen sink” at economic issues caused by the coronavirus. Included are rate cuts, credit and lending programs with potential injections of $6 Trillion into the economy. Furthermore, they intervened in the bond markets allowing them to purchase High Yield Bonds, State and Municipal bonds helping to stabilize those markets. The actions taken by the Fed during this crisis dwarf their actions during the 2008-2009 Financial Crisis.
- The Paycheck Protection Program administered by the SBA authorized $349 Billion in forgivable loans for small businesses to pay their employees over an 8-week period during the Covid-19 crisis.
- The stock market had it's best week since 1974, thanks to a decline in new coronavirus cases globally and increasing optimism that measures being put in place are taking effect. Last week, the S&P 500 was up more than 11%, the Dow +12% and the NASDAQ almost 10% in a short week of trading.
- Market volatility has decreased - we've moved away from daily shifts of 1,000 points or more on the Dow. For reference, the graphic below shows just how sharp the swings of the S&P 500 have been compared to normal market activity over the past year:
- Talks of re-opening the economy sooner rather than later are in the forefront. Treasury Secretary Steven Mnuchin believes the US economy will be up and running by next month but that would most likely be a staggered opening. Germany announced today that they will be opening small retailers next Monday and schools on May 4th but will refrain from large public events until the end of August. How to re-open the economy, while protecting the health of the American people, will be the topic of conversation for the foreseeable future. Schwab has an interesting take on what the economic recovery could look like:
https://www.schwab.com/resource-center/insights/content/what-will-recovery-look-like
Coupled with the above positive information comes the concern of earnings season, which is currently underway. Earnings season by definition is the period of time in which a large number of publicly traded companies release their quarterly earnings reports. While it's expected that results will be disappointing, it's not possible to predict how the markets will respond. We'll, of course, pay close attention to this and the effects on our equity holdings.
Lastly, we want to say thank you to all of our clients. Our clients have been wonderful to work with through this pandemic, and we couldn't be happier with the response we've received. As always, please reach out to us anytime you have a specific concern or want to have a conversation about your investments or financial plan.
Again, thank you.