We are wrapping up another hectic week for the markets, the economy, the policy arena, and the Coronavirus pandemic. Below is a recap of the latest news you should know, plus what to watch out for as we head into next week.

What Happened in the Markets?
When markets closed last week on Friday, March 20, the S&P 500 had lost almost 30% of its value from its February 19 peak, and suffered its worst one-week decline (down 15.0%) since October 2008.  The Senate stimulus bill was expected to pass over that weekend, while the Fed had previously cut interest rates to 0% and announced plans to purchase billions in Treasury and mortgage-backed securities.  The global health crisis of COVID-19 had started its exponential climb in reported cases in the United States, with experts labeling New York as the new epicenter of the outbreak. In short, additional downside volatility in the markets was expected.

Instead, the S&P 500 rallied this week for a 10.3% gain, its best week since March 2009.

HFA BAUM 2020 Mar 27 Update for Clients FINAL

There were several emergency measures taken over the week that helped lift stocks.  First, the Fed stated there would be no limits to its bond-buying program, which had originally been capped at $700 billion, and it announced a series of new credit facilities and expanded liquidity pools to stabilize the financial system.  Secondly, the Senate and House passed a $2 trillion stimulus bill to aid the U.S. economy as:

  • Roughly half of the U.S. population was ordered to stay at home.
  • Services business activity dropped to historic lows.¹
  • Manufacturing output experienced its sharpest drop since 2009.¹
  • Companies reduced workforce numbers at the fastest rate since 2009.²
  • 3 million people filed claims for unemployment benefits for the week ending March 21, the highest number of claims in U.S. history.

The markets have likely priced-in significant future economic distress, leading to lower expectations for consumption, production, and growth in the months ahead.  Markets may continue to gyrate as new economic data is released and assimilated.  We don’t know for certain how the COVID-19 public health crisis will play out, but we anticipate that investors will be compensated over time for the equity risk they are currently taking.

Past Federal Reserve Chairman, Ben Bernanke, and current Chair Jerome Powell commented on the economic environment this week:

 

Image 1 2020 Mar 27

Ben Bernanke, who oversaw the Federal Reserve’s response to the 2008 financial crisis, said on Wednesday that our current economic halt resembles more of a natural disaster than a systemic monetary or fiscal shock. Bernanke said he expects a “very sharp” U.S. recession but a “fairly quick” recovery. Most importantly, he noted that “if we don’t get the public health right,” there is no monetary policy or fiscal legislation to overcome that.

 

 

Image 2 2020 Mar 27

Meanwhile, current Fed Chairman Jerome Powell said on Thursday that we may be in a recession already, but that he “would point to the difference between this and a normal recession.” Powell added, “there is nothing fundamentally wrong with our economy … we are starting from a very strong position.” He echoed Dr. Anthony Fauci, one of the top scientists in the Coronavirus Task Force, that the timetable of a recovery would be dictated by the virus.

 

More on the $2 trillion stimulus package

After days of intense negotiations, the Senate and House passed the largest stimulus bill in modern American history. It is the latest legislative effort designed to bolster the U.S. economy during the ongoing Coronavirus pandemic.

Below is a basic breakdown of the bill for individuals, businesses, state and local governments, and hospitals:³

For Individuals & Married Couples:

  • One-time checks of $1,200 will be issued to Americans with adjusted gross incomes of up to $75,000 for individuals and $150,000 for married couples. An extra $500 per child is available for eligible individuals and couples. Certain phase out provisions apply.
  • Americans will also receive expanded unemployment benefits that extend unemployment insurance by 13 weeks.
  • Unemployed workers will receive an additional $600 a week for four months.

For Large Businesses:

  • Large businesses will benefit from $500 billion in loans, loan guarantees and other aid.

For Small Businesses:

  • Small businesses will have access to $349 billion in loans to assist with payroll, rent and utilities.

For State and Local Governments:

  • $150 billion is available in direct aid to states and local governments.
  • An additional $25 billion is allocated for public transit.

For Hospitals & Healthcare Providers:

  • $117 billion in funding for hospitals, veteran’s care and medical equipment.

We are all in this together
Please continue to stay tuned for more updates on the news and events that impact your day-to-day financial life.  Please contact us at (310) 791-3226 or email your personal wealth advisor directly if you would like to continue the conversation.

Wishing you and your family safety and good health now, and in the weeks and months ahead.

HARRIS FINANCIAL ADVISORS

 

Disclosures

The S&P 500 is a market capitalization-weighted index that tracks the 500 largest companies listed on the New York Stock Exchange or NASDAQ Composite. It is used as a benchmark of the overall stock market’s performance.

Return data represent past performance and are not indicative of future results. Historical performance does not reflect applicable transaction, management or other applicable fees as noted, the incurrence of which would decrease hypothetical, historical returns.

Source for all charts and text contained within graphics: © 2020 Clearnomics, Inc. All Rights Reserved. The information contained herein is proprietary to Clearnomics and/or its content providers and may not be copied or distributed. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein. All reports, charts and graphics compiled by Clearnomics or any of its affiliated websites, applications or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and any commentary for any and all markets should not be construed as a recommendation to buy, sell or hold any security –including mutual funds, exchange traded funds or company stock.

 

[1] Based on the Markit purchasing managers’ index for the services sector.

[2] Based on data from Markit.

[3] Rubin, Richard. “Senate Approves Roughly $2 trillion in Coronavirus Relief.” WSJ, 3/26/20.  https://www.wsj.com/articles/trump-administration-senate-democrats-said-to-reach-stimulus-bill-deal-11585113371?mod=itp_wsj&ru=yahoo.