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Developments in the U.S. Coronavirus saga.

 

Developments in the U.S. Coronavirus saga.

The daily reports on the Coronavirus and our economy can create anxiety for just about everyone.  Are we in or headed to a prolonged recession?  Has the stock market bottomed and should be investing now?  Positive news from the health care sector and unprecedented support by the government appears to be helping stabilize our economy and the stock market.   What is the way forward and what will the next year or so look like?

The Mayo Clinic and the University of Minnesota are proposing an increase in their ability to test and track the virus.  Similar efforts are being made elsewhere.  Our Health-Care system has remained afloat to date and recently we have seen unprecedented and swift actions by the Federal Reserve and Congress to support the economy while science works on a vaccine and a better understanding of the virus.  When the Federal Reserve is as aggressive with its actions as it its now, and interest rates are low as they are now, the stock market is generally supported.  So, what is the way forward and what will the next year or so look like?

Given that it is widely expected that the Fed and Congress will continue providing economic support, the stock and bond markets should be able to weather near-term news on unemployment and corporate earnings.  We are also optimistic about the ability of our scientific community to come up with solutions soon and believe that once the crisis is contained, the nation and economy will revive, and possibly faster than some expect.  But some sectors may have bigger problems – airlines, restaurants, brick and mortar retail, landlords, and possibly hotels.  Lots of jobs there.  And a good number of small businesses may just not come back. Thing is, it could be a lumpy recovery with quite a bit of job dislocation and higher long-term unemployment.  But overall, GDP growth should come back starting this fall, driven by pent-up demand.  An important economic factor is how soon business can get back to work.  The longer businesses and their employees are out, the more economic pain we will endure and the longer it will take to get our world functioning again.

Exactly how the pandemic will end depends in part on medical advances still to come.  It also will apparently depend on how we all behave in the interim.  Given all of these factors, we are optimistic, but also aware of the questions still to be answered, including yours.  We are here to talk over your situation at any time.

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