Dear Clients and Friends, April 19, 2020
Sunday Evening Thoughts, +5 Weeks…
To Liberate or Listen
Most have read the headlines over the previous week, watched various news feeds, read reports from Stanford University, New England Journal of Medicine, Johns Hopkins, WHO, etc… and there is still much unknown. Where do we go from here? How do we reopen the worlds largest economy? Can people who had COVID-19 get re-infected? Are certain people, blood types, male or females more likely to contract the disease? All great questions that will most likely be studied, investigated, and special task forces assigned to re-investigate the investigators and we all know where this ends up… It seems as though we can’t agree on much, which in today’s world comes as little surprise. Pro-testing to re-open cities, economies, and states in spite of the week’s very large death toll. All I can say, my family will abide by whatever our state and municipality decide, we certainly feel for those who are in a high-risk category, and we pray all stay safe until this is over. We all want to see a return to normal and soon.
People started to receive their stimulus checks last week, via direct deposit. It is said, for anyone who has not had direct deposit already established with the Treasury, they will be issued physical checks and those will be sent out in the coming weeks. As we have mentioned in previous weeks, please be careful of scams. If you would like to see the status of your stimulus check please check the IRS website: https://www.irs.gov/coronavirus/get-my-payment
SBA Loans 2.0
Last week it was announced the Small Business Loan Paycheck Protection Program had reached its initial $350 billion funding cap. Many banks were relentlessly trying to enter more loans and have many more applications to process. Over the weekend, Treasury Secretary Steven Mnuchin has been busy negotiating a $300 billion round 2 that may be approved by the Senate Monday and we could see a possible house vote mid-week. These funds are vital for some small businesses who have been greatly impacted by shelter in place orders. There will be some businesses that even with this assistance won’t be able to hang on, we hope these numbers are few. It is estimated, most small businesses only have around 28-34 days of cash on hand to make it through a shutdown of this magnitude. This is the reason congress needs to act and fast on this funding initiative.
The Peak and Trough
Both, daily new cases and deaths have seemed to reach a peak. We have heard cases of hospitals now sharing unused ventilators and personal protective equipment with other states in need. This is a good sign that the spread of the virus is waning, and we will keep our fingers crossed and hands washed this trend continues, even after restrictions are lifted.
As infections were reaching a critical mass, the market was responding as anticipated with a brutal selloff across mostly all sectors. Even safe haven bonds were seeing pressure and market declines of around 5-10%. Have we reached a bottom? Only time will tell and now the question is we will see a re-test of those market lows. My belief is, the market will keep a watchful eye towards daily infections and if those trend back higher as restrictions are lifted, then the market may respond negatively. Just how much, again time will tell.
Just How Much Has Changed
Money managers are tracking and looking for every data set that may give them any indication when normalcy returns. I don’t believe anyone thinks there will be an all clear announcement made, that gives everyone confidence to go back to their “business as usual” routine. Here are a few key data points of note:
|Data Set||% Change year over year|
|Initial Jobless Claims||3,154%
|Weekly Retail Sales||+0.5% (weekly average vs. year ago levels, positive sign due to mostly strong grocery purchases)|
|Box Office Receipts||-100%|
|Rail Car Traffic (cars)||-15.9%|
|Steel Production (net tons)||-18.9%|
|Hotel Revenue per Room Available||-81.6%|
|Open Table Restaurant Reservations||-100%|
|TSA Checkpoint Data||-95.7%|
|Supply of Motor Gasoline in US||-48.3%|
Many of these key indicators above, start to shed some light on just how drastic the economy has been impacted from the virus and forced shutdowns.
We continue to review client allocations and risk positioning. Cash on the sidelines is and will be put to work on market selloffs. We are not of the opinion to chase and buy into market strength. The market has experienced a fairly strong recovery during the last two weeks, proceed with caution when putting money to work.
As always, if you have concerns about your own portfolio, give us a call. Where are here to help you through these challenging market conditions. Don’t forget you can follow us at on Twitter and LinkedIn for other important updates during the week.