ECONOMIC COMMENTARY (05-05-2020)
Please enjoy our ECONOMIC COMMENTARY along with FAMILY GOVERNANCE & WEALTH MANAGEMENT strategies that we share monthly with our clients.
I. ECONOMIC COMMENTARY
- May 5, 2:44 pm EST And we’re back. Despite the 1 million US infections of COVID-19 and more than 70,000 tragic deaths, our market averages roared back; erasing almost half of the March losses (check your statements). Because there is so much doubt in the immediate future of the economy, this short-term (partial) recovery didn’t have to happen this quickly but it did. Thank all of you for trusting your long-term plans to hold steady. We are investors not traders and this past month depicted why. Good judgement allowed all of you to participate in the fastest rise in the market averages since the 1980s.
- Physical Health = Fiscal Health. With more than 30 million people filing for unemployment, there remains a lot of doubt about the short-term status of the economy. Because the bond and stock markets reflect future expectations, it isn’t smart to see the recent rise as a sign that the overall economy is recovering. Market analysts expectations are running wild because corporate CEOs are not comfortable predicting how their businesses will do this quarter or beyond. In case you were concerned, the job of a market analyst is much harder than it used to be. They generally predict that we will “test the [stock] market lows” of March as it is typical for huge market losses to recover (as they have), then drop again (double-dip). Noticeably, bank stocks have not recovered from their lows; banks can usually telegraph sustainable economic recovery. In fact, much of the April recovery can be attributed to energy stocks – which had nowhere to go but up – and technology firms. Lately the market capitalizations of tech firms have driven the direction of market indexes (averages) and they are thriving during the lockdown. The real economy will reflect poor numbers for this second quarter of the year (April, May and June), it’s just a question of how poor. Unlike past economic crises, the story of 2020 is tied to the fledgling health of the world; especially the United States.
70% Infection Rate. The health crisis won’t be “over” until most of the country has contracted the coronavirus or there is a vaccine. We are currently at a 5% to 15% infection rate (depending on who’s numbers you believe). Regardless of individual states “opening up,” scientists are waiting for the advancement of testing, contact tracing, a treatment and eventually a vaccine before declaring any victories. A 70% to 80% infection rate will be the unfortunate catalyst that "normalizes" the virus. In the United States, April recorded approximately 30,000 new cases per day. Pfizer and German drug maker BioNtech are beginning human clinical trials for a vaccine today. If successful, they could begin massive production of the drug by October and worldwide production by January 2021.
II. FAMILY GOVERNANCE, WEALTH MANAGEMENT, ETC.
- More than one third of the year is done. Take this time to reassess your resolutions and make new plans. What we are most confident in is our human ability to adapt. We don’t need the world to go back to normal. We just need to be ready. Get ready.
Jason J. Howell, CFP® is a former U.S. Congressional Candidate and in 2019 was listed as a TOP WEALTH ADVISER by WASHINGTONIAN magazine. Jason Howell Company is an independent, family wealth management firm run by two owners who consider it their family business. Jason J. Howell, CFP® and Douglas W. Tees, MBA, CFP® are both married to patient wives and are dedicated to their kids. They have built a firm with a great reputation located just outside of the nation's capital in Washington, DC. (Northern Virginia). They hope to honorably serve their growing family of clients for decades.
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