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Market Commentary

April Monthly Market Commentary

R.I.P.: The Longest Expansion


It won’t be confirmed for at least several months, but the U.S. is almost certainly hurtling into a recession. A little over a month ago, when the COVID-19 Coronavirus first hit the headlines, we, along with most economists, thought the nation could weather the storm if proper policies were quickly implemented and the outbreak contained before becoming a global pandemic that would invade American shores with a devastating blow. Bolstering this optimistic assessment, the U.S. economy was riding high before the shock struck like a thunderbolt. The job market was humming, consumer confidence remained elevated and the financial markets were pricing in continued growth in activity and earnings, although at a diminished pace. Indeed, stock prices hit a record high on February 19.

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March Monthly Market Commentary

What’s in Store After the Boeing and Coronavirus Shocks?


During this record-long expansion, now in its eleventh year, the economy has struggled through seven episodes in which its growth engine has downshifted sharply – to about one percent or less for a given quarter. These occurrences were usually brought on by some external shock – a government shutdown, a sovereign debt crisis, a severe energy slump or some geopolitical event. In every case, growth rebounded to at least the pace that prevailed prior to the setback once the shock wore off. In the most recent example precipitated by the government shutdown in late 2018, GDP snapped back from a 1.1 percent growth rate in the fourth quarter of 2018 to 3.1 percent in the first quarter of 2019.

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Weekly Market Commentary

April 6, 2020


With about 90 percent of Americans in some form of lockdown, the stranglehold that COVID-19 has on the economy continues to tighten. It will take months before the data reveals the true severity and breadth of its tightening grip, but a smattering of incoming reports hints at how enormous the economic carnage is likely to be. Over the past decade, for example, the economy has generated 23 million net new jobs, a singular bright spot of the longest, albeit lackluster, expansion on record. In the last two weeks, however, almost half of those payrolls have been vaporized, as 10 million workers submitted initial claims for unemployment benefits. By the end of next month, the remaining 13 million should fall by the wayside, and then some, as the jobless rate climbs to well over the 10 percent peak seen during the Great Recession and financial crisis.

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Weekly Market Commentary

March 30, 2020


If you woke up on Friday with a severe case of whiplash, you are not alone. By the close of trading on Thursday, a three-day rally had sent the Dow Jones industrial average up by more than 20 percent, which qualifies it as a new bull market. Just three days earlier, investors were still licking their wounds over the most devastating plunge in stock prices since 1987. But before investors had a chance to uncork the champagne, stocks suffered another setback on Friday, erasing nearly a quarter of the three-day rally. Once again we are reminded of how powerfully the herd mentality can move markets. The question is, how closely does the shifting mind-set of traders and investors line up with reality?

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Weekly Market Commentary

March 23, 2020


In a welcome pause from its Fed-bashing ways, the administration is now lining up with the central bank to apply a full-court press against the rapidly-spreading Coronavirus. The full extent of this all-out effort has yet to be realized, as policy makers are still rolling out measures to contain the escalating human and economic fallout from the pandemic. The more nimble Fed took the lead, embracing a series of emergency moves akin to those taken during the Great Recession and global financial crisis a decade ago, including slashing its policy rate to near zero and reviving a massive asset-purchase program.

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Weekly Market Commentary

March 16, 2020


The financial markets and vested participants are understandably obsessed with hard data. But when events strike suddenly and move the needle as swiftly as is currently the case, even the most recent economic report becomes moot. For example, the Federal Reserve Bank of Atlanta’s GDPnow tracking model pegs growth for the first quarter at 3.1 percent, up from a 2.7 pace in the previous estimate, based primarily on the blockbuster payroll report released last Friday. To be fair, the bank unequivocally states that: “GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model.”

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Weekly Market Commentary

March 9, 2020


Sometimes the message works, other times it backfires. Policy makers are pulling out all stops to contain fears that are buffeting the financial markets and amplifying the growth-damaging impact from the spreading Coronavirus. Both the federal government and the Federal Reserve are employing emergency measures to stem the tide of anxiety on Wall Street and Main Street, but their efforts have yet to garner the desired results. To be sure, the $8 billion funding bill aimed at containing the virus that was approved by Congress this week should help the cause. But in the short run, it will not motivate people to travel, go to movies, visit amusement parks, the theater or other venues where proximity with others that might be infected with the virus are present, including the workplace. Nor, for that matter, will the fiscal aid do anything to alleviate the disruption to supply chains that threatens to stifle production over the next few months.

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Weekly Market Commentary

March 2, 2020


With the Ides of March rapidly approaching, is the economy about to be struck with the proverbial knife in the back? That question looms larger each day the spread of the Coronavirus continues unabated, threatening to deliver the death knell to the global economic expansion. Unlike Julius Caesar who didn’t heed the omens, households, businesses and governments are stepping up protectionist measures to contain the outbreaks. The problem is, these measures are taking a toll on the global economy, thus amplifying the debilitating impact the disease is having on human life. The longer containment efforts remain an imperative, the more severe is the potential toll they will take on the global economy.

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