Special Economic Report: April 16, 2020

Stocks pulled back yesterday but finished off their lows.

As it becomes clear the worst of the outbreak is behind us, the focus remains on opening up the economy.

It will likely be on a rolling basis. Lesser hit states will likely go first, with harder hit states going last or opening up to a lesser degree.

Guidelines are expected to be issued soon and the administration is expected to work hand in hand with the governors.

While that still means being locked down for another couple of weeks, it’s great to know we’re getting closer.

We got some bank earnings yesterday, and as expected, they weren’t pretty. But hardly a shocker.

Retail sales were down as well, falling by -8.7%. Basic goods were up but were dragged down by food services, gasoline, and auto sales. Although I must say, while it fell greater than expected (the consensus was for a -7.3% decline), I thought it was a decent showing, all things considered.

Mortgage applications were up 7.3% overall. The Purchase Index was off by -2.0%, but Refi’s jumped by 10%.

The Empire State Manufacturing Survey showed the General Business Conditions Index falling to -78.2 vs. last month’s -21.5 and views for -35.0. But like most of the other reports, none of this was a surprise and we all know why this is happening.

That’s probably why nobody really batted an eye at the Goldman Sachs report that said the global economic drop will be 4x worse than the financial crisis of 2008.

But it’s important to remember, this was not a bubble. There wasn’t a structural economic problem. This is because governments around the world shut down their economies and asked people to stay home in an effort to slow the spread of the coronavirus. So, of course, the economic numbers are bad, but it’s all short-term and the drop in stocks already reflected that.

However, the part of the Goldman report that isn’t getting as much airtime is the part where they say the recovery in the second half will be “unprecedented” and that they expect stocks to fully recover by year’s end.

And it looks like more and more people are expecting that too. The market is forward-looking. If one is expecting a full recovery in the second half, the time to get in is now.

The bear market has already officially ended for all of the major indexes, and a new bull market is underway.

And it looks like it could get even better with the start of earnings season having just begun.

Since stocks typically go up during earnings season, that’s adding even more excitement to the market and it’s not uncommon to see individual stocks soar 10%, 15% or more in one day after an earnings report.

We at BWFA believe that we still face challenges in the US Economy and it is very likely we will see good news one day and bad news the next which will keep volatility high. We are trying to focus on the proven winners and reducing our exposure to areas of the economy that will be challenged. This an unprecedented period of time and we are here to help you and your families remain financially well-positioned during this crisis. If you would like to set up a meeting give us a call or email to set up a virtual meeting to discuss your financial plan in detail. Stay safe and healthy.




Robert G. Carpenter

President & CEO
Baltimore-Washington Financial Advisors