We closed lower on Friday, and lower for the week. But remain well off the lows from the previous week.
The big news on Friday was the Employment Situation report. As expected, it was ugly, with a loss of -701,000 jobs and the unemployment rate increasing from 3.5% to 4.4%.
But, just like the Jobless Claims reports last week and the week before, none of this came as a surprise. Everybody knew it was going to be bad and will probably get worse, but totally expected and a temporary point in time due to the displacement caused by the coronavirus.
Gladly, the Payment Protection Program that just passed is already being put to use and over 9,000 small businesses have already tapped into it for $3.5 billion dollars in relief so far. That lets businesses take out low-interest loans to cover expenses for the next two months. And those loans turn into grants (they don’t have to pay it back), if those employers maintain their payroll and compensation levels. The great benefit with that is it keeps workers at shuttered businesses employed and when the economy reopens, both the company and employees can hit the ground running!
Everybody will be watching the outbreak over the next two weeks as it’s projected to reach its peak in the U.S. by mid-April. If that comes to pass, we could begin to start opening the economy shortly thereafter (late April/early May).
As I mentioned before, U.S. officials have been paying close attention to Italy because they’ve had a severe outbreak and they were ahead of us by about two weeks. Since our initial curve mirrored theirs, we enacted strict social distancing and mitigation measures in an effort to flatten our trajectory vs. theirs. And aside from NY and NJ, it appears we’re seeing that.
But more importantly, the rate of new cases in Italy is slowing, and that’s great news for us, and why there is growing confidence that we’ll reach our peak while simultaneously avoiding the worst-case scenario.
The sooner we get through this, with the least amount of damage, the bigger and faster our recovery will be. In fact, our economy and stocks could have pent-up economic demand which could be unleashed in the second half of the year. Remember the stock market is a leading indicator and should be looking out 6 months in the future.
So all eyes will be on the next two weeks and every little piece of good news is a positive sign that we’re getting closer to reopening our economy. At BWFA we are looking into the future to give our clients the best possible forecast of what to expect. We are remaining cautiously optimistic and betting on the “American People” to rise to the challenge that is ahead. We have to remain steadfast in our approach and let history be our guide. We will persevere and we will come through this stronger than ever. If anyone needs our help in any way please reach out to your team who is ready to help you and your family.
Robert G. Carpenter
President & CEO
Baltimore-Washington Financial Advisors