Newsletter 06/05/2020

We thought it couldn’t get worse, here we are with a trifecta of huge challenges. Pandemic, unemployment nearing record highs and now the murder of George Floyd sparking the largest civil rights movement of all time with demonstrations in all 50 states and protests igniting internationally.

It makes me think back to my early career as a stock broker and the beginnings of my financial planning business. On tough days when it was hard to see how I would have any clients I would say to myself “well, I guess things are just not bad enough to turn the corner to better times.” For my own career, this is what happened. Through the years, what started as a mixed bag of good days and bad days had matured into a solid business, offering clients valuable financial planning advice and managing their investments to provide for them through their life stages! For us as a community, as a society, as a nation; is this the “bad enough” that means we will turn the corner soon? I hope so and that is the result we are planning and anticipating. 

The Stock Market

Each day brings some bad news and good news. The good is that the news could be worse. The bad news is just straight bad. Record setting unemployment and projections for a historic drop in 2nd quarter GDP amidst the reopening of American businesses. Stock markets are forward looking and see the economy reopening during massive Federal Reserve monetary and Congressional fiscal intervention. Regardless, it is hard to get visibility after the Congressional stimulus ends. Currently, the House has passed legislation extending various Congressional programs that are part of the CARES act as well as providing funds for states and cities, covid-19 testing and more.  The Senate has yet to discuss any further legislation.

The Economy

There are some signs of bottoming of the economy and projections that the recession could be short-lived. Airline bookings, gas consumption and other lagging indicators show a pickup in consumer activity. Mark Zandi, chief economist at Moody’s Analytics, is quoted as saying “This covid recession will go down as the shortest and arguably the most severe in history.”

Every time the US goes through a crisis - about every 10 years - in the middle of it all it seems like there will be no end. Human nature is not oriented to seeing past anything that is happening currently, perhaps this bias is why it is such a task to plan for the future. Recency bias keeps us laser focused on current events. In good times this bias is called irrational exuberance. In the middle of a downturn it is human nature to think that this will last forever. Only taxes and death last forever. We all know that, but it doesn’t take away the legitimate notion in the moment that the present feels permanent. 

Remember the crisis over our relationship with China? That relationship seems to be deteriorating right now but it also seems to not be affecting markets negatively. What’s that about?

What are we looking for on the other side of these crises? First, the ongoing public health crisis could potentially be aggravated by states and regions reopening too suddenly as well as any demonstrators not adhering to social distancing best practices. Although many demonstrators are wearing masks, it is less and less possible to practice social distancing in crowds with thousands of participants. Solving the health crisis means establishing a safe way for communities to reopen and that involves testing and tracking until there is a vaccine. That is the first step and a big step at that.

In regard to the George Floyd injustice, it is up to each of us to reflect and to act. We are tasked with unpacking our own biases, perceptions of societal constructs, daily habits, and our treatment of all humans. We must make decisions about what we can do to make our communities and country stronger for all. Cohesion of our nation when it comes to civil rights begins with each of us individually and radiates outward. I quoted Jamie Dimon in a previous email saying that we have to take action about income inequality. The way to eradicate our doing harm to each other is through self reflection first and holding ourselves accountable to the kindness and brotherhood we all deserve. These are huge issues that demand reflection and reaching inside to say we can do better, we will do better.