Hello! We hope that you’re doing well and staying healthy. After finishing what felt like one of the longest months ever recorded in history, April gave us time to absorb the swift movements of the market, as well as understand how the government’s recent actions impact both our clients and the economy.
Cory Krebs, our Portfolio Manager & President would like to share some thoughts:
“Though the new decade is only four months old, this era’s stock market results have already been monumental. In March, the more than 12% drop by the S&P 500 was the poorest monthly return for the index since 2008. April, however, was not to be outdone with equities rising by nearly 13% to post their strongest monthly performance since 1987. These schizophrenic market results have been driven by widely disparate economic projections as the pandemic situation and its financial ramifications remain incredibly fluid. A handful of recent catalysts has served to lift the spirits of investors. Accommodative fiscal and monetary policies have been implemented, quarantine measures have had the intended effect of “flattening the curve” and scientific understanding of the virus has grown swiftly. The Federal Reserve began a series of programs in March with the intent of stabilizing the short end of the maturity spectrum. By providing overnight liquidity to banks through open ending lending programs and stabilizing the commercial paper market, risk assets further out the spectrum eventually steadied as domino effects prevailed. In early April, Congress passed a series of bills to provide cash to both consumers and businesses. Expanded unemployment benefits and stimulus checks helped to get spending money in the hands of individuals in need. Payroll loans for small business and lending facilities for large corporations helped to ensure that businesses could weather the acute short run impacts of quarantine declarations. These broad stay-at-home orders resulted in an abrupt economic stop but aided in stemming a wholescale health crisis and may have achieved this objective within an economically manageable timeframe. If the lockdown measures can soon be safely phased out, a more normalized resumption of business activity might take effect in the second half of the year. The resulting quarter-long gap in economic output will be historic, but potentially navigable given the enormous scope of stimulus programs already announced. Delays to the resumption of economic endeavors are likely to be viewed poorly by investors and stand as a significant risk to the current posture of the equity markets. Conversely, any advances in treatments for COVID-19, which would accelerate the reopening of global economies, could prompt additional upside.”
While critical, investment management is just one aspect of our holistic approach to your financial situation. On March 27th, President Donald Trump signed the CARES Act into law. The bulk of the bill created capital relief for small businesses through various programs including the Paycheck Protection Program (PPP) so employees can stay on payroll until it is safe to return to work. Since our economy relies heavily on the consumer, many US citizens who qualify by income limits will receive an Economic Impact Payment (Stimulus Check) up to $1,200. Relief was also considered by reducing tax liability in various ways. The most notable of these was the elimination of Required Minimum Distributions (RMD) for 2020. This, along with other changes, may create financial planning opportunities to enhance tax savings, further charitable giving, or ease the transfer of wealth. Not all planning strategies apply to you, but they could benefit your loved ones. We’re happy to be a resource during this time of change for any who might need our services.
Thank you for your patience – stay safe and healthy!
The CooksonPeirce Team