Q1 2020 Economic and Market Perspective

For the first time in this generation, American citizens are experiencing a global pandemic that is uprooting not only our daily lives, but our economic climate as we know it. Between states on lockdown, consecutive best / worst weeks for the stock market, and the largest government economic stimulus plan in history coming to fruition (CARES Act), the first quarter of 2020 has arguably been one of the most eventful and historical quarters in world history.

Unfortunately, the Dow Jones Industrial Average and S&P 500 wrapped up their worst first quarters in history at the close on Tuesday, March 31st. The Dow and S&P closed down -23.2% and 20% for the quarter respectively with the Energy, Financial, and Industrial sectors rounding out the most diminished returns for both indexes. Unsurprisingly, Health Care was and will likely continue to be an area of interest as companies in Pharma and biotechnology race to develop a vaccine and other medicine combative to the coronavirus as well as mass produce medical equipment to continue to arm health care providers. Additionally, several beauty companies and alcohol manufacturers are shifting production to health care materials such as hand sanitizer, masks, and other protective gear to help combat the spread of the virus, giving a more positive outlook for the Cosmetics and Beverage sectors next quarter. At the time of this writing, the market has since rallied 20% out of bear market territory to give a glimpse of hope that the virus’ grip on the economy will ultimately fade in these next few weeks and months to come.

Another milestone the economy has under its belt this quarter is the largest government stimulus plan in US history. With record numbers of unemployment (and rising everyday), the US government voted to pass a $2.2 trillion stimulus plan to boost the economy and encourage consumer spending despite the current economic climate. Benefits of the plan include an increase in unemployment benefits, 2020 RMD suspension, and small business loans just to name a few. Although the 10-year Treasury yield dropped below 1% in the first quarter aided by panic buying and further quantitative easing from the Federal Reserve, another drop in interest rates means Americans can still depend on a more ideal mortgage rate, lower credit card payments, and all around “less expensive” money for the time being. While the global economy has certainly slowed down as expected, it’s clear the Federal Reserve has a contingency playbook in hand in order to optimize consumer spending wherever possible.

We feel it’s important to stress how easily our current economic and global situation can be interpreted as something inherently negative- we choose not to fall into this category. We are experts in our field and while this situation is particularly unprecedented, we successfully managed and learned from the financial crisis of 2008 and are familiar with the playbook the Federal Reserve utilized to create a solution. There are many similarities between the two periods, and we educate ourselves daily on ways to capitalize on the many inefficiencies and dislocations that arise from this immense volatility- chaos creates opportunities and we will act accordingly in the best interest of our clients.

If you have any questions about The Coronavirus, Aid, Relief, and Economic Security Act or anything things mentioned above, please don’t hesitate to reach out to your service team at any point in time.

For further information please email: Info@Nashvillepwm.com