June 1, 2020

As summer begins, we are hoping that warmer weather slows the spread of COVID 19 and more of the country will continue the process of getting back to work.  Certainly, social distancing and shielding the most vulnerable seemed to have the effect of eliminating the anticipated strain on hospitals and health care systems.

The Dow, S&P 500 and NASDAQ all had another positive month being up 4.3, 4.0 and 5.4 percent respectively. 

We expect the unemployment rate to remain high until more businesses fully open and enhanced benefits run out in late June.  Until then, there is little incentive for employees to return and give up extra income (for staying home) to return to work.  The unfortunate byproduct will be the shuttering of newly created or under- funded small businesses who could not withstand the shutdown.

The “new normal” may be a lot different than what we are expecting.  Businesses may look at having increased work from home options for trusted employees and technology may have catapulted businesses 5 years into the future.  So, although the pandemic journey may have been short and painful, there may be some good that comes of all this chaos.

With limited time to get back up and running, we anticipate that the economy in the second quarter will contract and that GDP will decline. As a result of closing down, the US has been hit far harder than any other nation by the COVID-19 pandemic.  The main challenge is the extent to which consumers are willing or have the money to engage with face-to-face service sectors.  Growth in the third quarter may be in the low single digits and approaching double digits in the fourth.  In China, we expect that global demand will be weak for some time as more countries adopt a more nationalistic approach to manufactured goods.

Year to date the Dow and the S&P 500 remain in negative territory at -9.06 and -3.10 percent while the Nasdaq is up 9.66 percent.  The 10-year Treasury is currently yielding 0.63%.

*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.