Any parent with the experience of having a child in the backseat of a car is familiar with the famous inquiry of “Are we there yet?” The answer is invariably ‘No’. And that’s the same answer we must give to similar questions about the road to recovery from the Coronavirus pandemic. On the other hand, our two-handed economist says that we can see some green shoots appearing.

Of course, there are disturbing economic reports still coming out and that will continue for a while. When hearing those reports, it’s critical to remember that most of the reports are lagging indicators. In other words, they report conditions that we have already experienced. We have already moved on down the road and things continue to look brighter going forward. Most of the bad news reports — regarding things like unemployment claims, retail sales, housing starts, etc. — still look ugly but most are quite a bit better than was expected.

We congratulate the Trump Administration for speed and efficiency in putting together the CARES Act as an aid to those affected financially by the Coronavirus pandemic. Great to see the broad support from both Democrats and Republicans in Congress but we truly appreciate the idea from the White House that the whole thing be conducted by the Small Business Administration rather than create a new department for the tasking. By choosing that route, we could capitalize on many already existing elements – things that would be required for the mechanics of the aid package to actually work in short order.

It’s pretty rare to see the wheels of government so responsive. Of course, when moving that fast one may reasonably expect that some things may fall through the cracks and there will be unintended consequences. I’m not too upset by this. When facing a large-scale emergency, the wise choice is to go ahead with getting aid to those in need ASAP. If it turns out that there are holes to be patched, fine…we’ll get to it later. I remember a great quote from General Patton “A good plan, violently executed now, is better than a perfect plan next week”.

While we are being complimentary to Trump’s economic team, it is very important to maintain a broad perspective of where we’re at in the long arc of this pandemic event. Covid19 was/is a medical crisis but also an economic one. Fortunately, the hospital system rose to the occasion and almost universally avoided being overwhelmed. Similarly, the CARES Act and associated legislation are performing well for their roles on the financial front. However, this legislative effort has primarily addressed the crisis of liquidity. That is to say, keep a sufficient amount of money in the system and keep it circulating. The next hurdle will be the crisis of solvency and it remains to be seen what additional support could be required and what may come down the pike from local and federal governments.

The GDP losses are in numbers not seen before. That’s a fact. But also true is that the entire situation is very, very fluid. To put a fine point on just how fluid, take a look at the just released CBO Economic Projections for 2020 and 2021, specifically their expectations for 3rd quarter growth in the current year. They’re looking at 21.5%. That would mean a 2020 full year contraction of -5.6% — all in all, a much better year than expected.

Now, let’s go back to the issue of where we might now be along the road to coronavirus pandemic recovery. It is truly unfortunate that much of our national thinking these days has been reduced toward the binary. Even the public attitude about Covid19 is split into two camps: those who are eager to open the economy VS those who would extend the lockdowns. The extenders are quick to point to any numbers that could support their cause but their arguments are losing steam. Nowhere was that more clear than last week when Florida reported 500 new cases. That made the headlines. What failed to make news was that the 500 were part of a data dump of 75,000 cases, making the 500 represent a positivity rate of 0.64%. As Spiro Agnew once said, “Beware the nattering nabobs of negativity.”

Ron’s Market Minute — Fingers Crossed! 

We’re certainly having an interesting week… so far.

Note this chart of the SPY, an exchange-traded fund that very closely represents the S&P500 Index*.  If you look carefully, you’ll see that the ENTIRE gain for the week happened before the market opened on Monday. 

 The other main indexes are sporting very similar-looking charts. Now note that this week’s numbers are coalescing around the 294 number. That line has been the ceiling for over a month. Just last week I mentioned in this newsletter that US stocks appear to be stuck in a trading range. That seems pretty obvious and yet various pundits appear to have two different takes on the current situation. They either hypothesize that the ceiling will again hold, and perhaps cause stocks to bounce back down to retest the lows from March, OR they guess that the third time will be the charm – and this index will finally breach the ceiling. If markets continue to stick at or above the current level for another week or two, we’ll throw our hat in the ring of looking for an upswing.

Fingers crossed.

Have a safe long holiday weekend!

(I am SO looking forward to three days with a closed market!  See you next week.)

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw@denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

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