Situation Desk: May 15, 2020
Situation Desk: May 15, 2020

Situation Desk: May 15, 2020

 

By:

William M. Giffin
William M. Giffin
Chief Executive Officer
Executive Board Member

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Kevin Rice
Kevin Rice
Senior Investment Strategist
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Situation Desk: May 15, 2020

From the Situation Desk – Market Update from TC Wealth Partners

Recap

As we go through the news every morning, opinions are all over the place. Some believe schools will reopen this fall, while others predict school will remain online. We hear people who believe the world is coming to an end, and those who think everybody should go back to work and this will be over soon. Some predict a V-shape recovery in the second half of the year like no one has ever seen, while others fear a depression is upon us.

Those with a measured perspective don’t often get the spotlight because the press looks for the outliers. If you go back to the 2008/2009 financial crisis, you had experts making bold predictions that were completely wrong. Those same individuals are front and center again, making those same bold predictions that can send many on a wrong path. Headlines are often driven by the day’s whim, who is reporting, and even what channel you are watching. Through my years in the financial industry I have seen how these headlines can cause great uncertainty among investors. Many times, an emotional and hasty decision turns out to be the wrong decision.

Throughout this crisis we have continued to advise you to stay the course and speak to your advisor. This isn’t because it is a good way to end an email or a blog post – we say this because the two most important things you can do right now are to not derail from your long-term path and to keep an open line of communication with your advisor. “Stay the course” doesn’t necessarily mean we or you shouldn’t consider changes based on your individual needs or concerns. It just means stay committed to the process. Being open with your advisor on how you feel about the current market environment is also very important, so please never hesitate to share your thoughts with us.

While some of our clients look at these times as a buying opportunity, others prefer to become more defensive in their portfolios, and many feel “this too shall pass.” Our goal is to invest based on your specific needs and risk tolerance. That is our promise to you. We will continue to keep you updated with the most current data and our point of view. But at the end of the day, everyone’s situation is different.

Which brings us to our latest Market Update. Continue on to read about the latest in the economy and our thoughts.

Market Update

Stocks are on pace to finish their worst week since late March. This week investors grappled with a slew of economic reports, increasing tensions between China and the U.S., and testimony from Dr. Fauci and Federal Reserve Chairman Jerome Powell.

Federal Reserve

On Wednesday, May 13th, Federal Reserve Chairman Jerome Powell held a virtual event with the Peterson Institute for International Economics. During the conference he warned of a prolonged market downturn and called for more government intervention to prevent lasting damage to the economy. Additionally, he stressed the need for further support from Congress as the economic recovery is likely to be bumpier – and longer – than expected. While taking questions after the event, Powell pushed back firmly against the idea of negative interest rates, even as the market continues to price in some chance of it by 2021. Taken all together, Powell’s gloomy outlook for the economy this week has caused investors to reassess if financial markets are adequately pricing the economic reality of a pandemic; this could lead to more weakness for stocks in the near term.

Virus

Dr. Anthony Fauci, a key member of the White House’s coronavirus task force, warned Senators on Tuesday of the serious consequences of the economy reopening too quickly. In his testimony, Fauci also suggested that schools might need to remain closed in certain areas. After his testimony, U.S. stocks tumbled as investors weighed efforts to reopen the economy against the risk of setbacks in the fight against COVID-19.

Trade War

On Tuesday President Trump said he would terminate the phase one deal if China does not live up to the goal of increasing imports from the U.S. by a total of $200 billion by the end of 2021. Trump also mentioned that he has not ruled out tariff hikes if non-Chinese experts are unable to participate in the search for the origin of COVID-19. The possibility of another trade war has added to investors’ fears of extending the economic downturn.

Economy

This week ended with a slew of economic reports with a mix of backward-looking numbers from April (retail sales and industrial production) and another update on jobless claims. This morning we learned that U.S. retail sales and factory output registered the steepest declines on record in April, illustrating how much of an impact COVID-19 has had on the economy. On Thursday, May 14th, we learned that 2.98 million people filed first-time jobless claims for the week ending May 9, bringing the total of unemployed to 36 million during the coronavirus pandemic. Overall, this data has increased concerns that stimulus efforts by central banks and governments might not be enough to ensure a rapid rebound from the economic hit caused by shutdowns.

Outlook

Given the amount of uncertainty about this crisis that still looms, we are not surprised by the setbacks we’ve seen in markets this week. As we mentioned in previous market updates, we continue to believe that volatility will remain elevated, but with lower market swings than experienced during the March sell-off.

 
 

Tags:  Consumer Confidence, Coronavirus, Corporate Earnings, COVID-19, Disciplined Investing, Economic Outlook, Federal Reserve, Global Supply Chain, Letter from the CEO, Market Performance , Market Update, May 2020, Situation Desk, Volatility

Note:  The content of this article is for guidance and information purposes only and is not intended to be construed as advice. Information provided is not intended to provide investment, tax, or legal advice.