VNFA NEWS

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Green Phase Updates
Our team is pleased that our neighbors who have not been afforded the opportunity to successfully work remotely are able to safely resume work. We have been fortunate that our infrastructure allows for us to provide our services and attention to clients from a safe distance during this time.

Since we closed our physical office spaces in March, our team has been devoted to three goals. 1) Maintaining the safety and health of our team and our clients. 2) Maintaining our client-first focus during remote service. 3) Emerging from this crisis stronger than before. With those goals in mind, we will continue to proceed carefully.

While many businesses are opening their doors now, our team has decided to continue to work remotely. Our physical office locations remain closed except for contactless pickup and drop off appointments at our Bethlehem headquarters. This decision is based on a majority vote from our team, and green phase guidance that “continued telework is strongly encouraged.”

We appreciate your continued support and patience as we work through our plans for eventually opening the office to client visits. In the meantime, we want to hear from you if you have any questions or feedback.

We wish you a happy and safe Fourth of July* weekend!
Your Team at VNFA

*PLEASE NOTE: We will be observing the Independence Day holiday on Friday, July 3. Contactless drop off and pick up of documents to our Bethlehem office will not be available Thursday or Friday this week. Additionally, we will not have someone answering the phone on these two days, so please leave a message in the appropriate mailbox and someone will return your call as soon as possible.

The Markets This Week

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by Maurice (Mo) Spolan, Investment Research Analyst
Equity markets declined last week, punctuated by the more than 2% fall across all American indices on Friday. New coronavirus cases have surged in the U.S., and sadly, daily new case numbers are now in excess of those reported at any point during April. Florida and Texas, two of the hardest-hit states in recent weeks, rolled back or paused reopening efforts. Houston’s hospital capacity is at 97%, while Arizona, a state also incurring a recent surge, said that its hospital beds are nearly 90% full. Bellwether companies such as Disney and Apple are halting plans to reengage with customers, as Disney delayed plans to welcome visitors back to Disneyland and Apple closed recently re-opened stores in areas with rising cases. With this all noted, month-over-month measurements of consumer health, such as retail sales and spending, indicate that economic activity has risen considerably since the trough in April.

Heightened volatility is likely to be present for the remainder of 2020 as COVID cases surge and retreat, medical professionals learn more about the disease and update their best-practice guidance, economic data continues to trickle in, and investors price in various scenarios.

The Numbers & “Heat Map”

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THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.
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US ECONOMY

CONSUMER HEALTH

NEGATIVE

May’s retail sales and consumer spending rebounded at record clips month-over-month, following unprecedented declines in April. However, new coronavirus cases in the US are accelerating as social activity has increased, which threatens to rescind the gains in consumer

confidence.

CORPORATE EARNINGS

VERY NEGATIVE

Coming into the year, analysts were expecting mid to single digit earnings growth, but the spread of COVID-19 is likely to have a substantial impact on near-term earnings forecasts. However, earnings could bounce back quickly once the pandemic has run its course.

EMPLOYMENT

VERY NEGATIVE

2.5 million jobs were added in May, in large part driven by the return of furloughed workers. The figure represents the greatest monthly increase in jobs since at least 1939, and a stark divergence from economic consensus which expected further unemployment. Nonetheless,

the jobless rate remains historically high at 13.3%.

INFLATION

POSITIVE

The deflationary environment created by COVID-19 should provide additional room for robust stimulus from both fiscal and monetary policy initiatives. However, we will be watching closely in the intermediate term for second and third order effects leading to a return of

inflationary pressure.

FISCAL POLICY

VERY POSITIVE

The US Government has passed a series of fiscal measures to combat the economic impacts of the COVID-19 pandemic. The largest of these measures, known as the CARES Act, provides approximately $2.2 trillion of support for businesses and families that are impacted by

business closures and unemployment.

MONETARY POLICY

VERY POSITIVE

In response to the threat of COVID-19, the Federal Reserve has implemented two emergency rate cuts and has moved its target interest rate back to zero. Additionally, it has announced its intention to conduct further asset purchases to support markets. We believe that the Fed

is doing all it can to support the economy and markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

Western opposition to China’s National Security Law, legislation that reduces Hong Kong’s autonomy, has amplified the discord already present between the US and China as a result of COVID-19. In addition, demonstrations across the US evidence considerable domestic unrest.

ECONOMIC RISKS

VERY NEGATIVE

The economic impacts of the COVID-19 pandemic are likely to be substantial. However, we believe that the eventual economic recovery (which will be aided by historically large economic stimulus) may occur more swiftly than from previous economic shocks.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

VNFA NEWS

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Help us help Northeast Community Center!

As part of our Volunteer Challenge project, we are launching an awareness campaign for our non-profit partner – Northeast Community Center. NECC serves the Marvine-Pembroke community of Bethlehem, and since the start of the COVID-19 pandemic, they have been a food pantry hub for even more surrounding areas of people in need.

In our remote socially distanced environment, #TeamVNFA has found that one of the safest and easiest ways to make a difference has been to purchase items from NECC’s Amazon wish list. Click the link here to make a purchase, and visit the NECC website to find out about other ways to help our neighbors in need.

The Markets This Week

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by Maurice (Mo) Spolan, Investment Research Analyst
Markets behaved relatively calmly last week as the S&P 500 gained about 2%. Nevertheless, investor attention has returned to the COVID-19 cases trend-line. Twenty-three states are currently reporting increasing cases, including 12 with record daily case figures. Mounting positive tests are the result of increased social activity, which provided for strong May retail numbers as sales increased more than 17% from April’s trough.

Unfortunately, for as long as we are without a vaccine, improving economic data is likely to be met by rising cases. This is because both outcomes are the result of increasing social activity. The financial markets value economic and corporate data, and so we are likely to see asset prices rise or remain steady as such data improves on the back of greater social mobility. Regrettably, however, as noted, this very social mobility seems to be the primary driver of viral spread. The main risk to the financial markets today is that the healthcare system becomes overpopulated as cases rise and additional shutdowns are made necessary. Unless such a scenario comes to pass, we should not expect the market to react unfavorably to rising cases, because rising cases are nearly certain to be accompanied by improving economic data. 

Did You Know…?

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This past weekend marked the start of summer. The June (aka Summer) Solstice was Saturday, June 20. Specifically, Saturday at 5:44 P.M. EDT marked the official beginning of summer in the Northern Hemisphere, occurring when Earth arrives at the point in its orbit where the North Pole is at its maximum tilt (about 23.5 degrees) toward the sun. For those who live in the Southern Hemisphere, this is the shortest day of the year and marks the arrival of winter.

The Numbers & “Heat Map”

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THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

NEGATIVE

Consumer activity has elevated since April’s trough, as evidenced by May’s retail sales which grew strongly month-over-month. However, 23 states reported an increasing number of COVID-19 cases in the last week, including 12 states who set daily records for cases.

CORPORATE EARNINGS

VERY NEGATIVE

 Coming into the year, analysts were expecting mid to single digit earnings growth, but the spread of COVID-19 is likely to have a substantial impact on near-term earnings forecasts. However, earnings could bounce back quickly once the pandemic has run its course.

EMPLOYMENT

VERY NEGATIVE

 2.5 million jobs were added in May, in large part driven by the return of furloughed workers. The figure represents the greatest monthly increase in jobs since at least 1939, and a stark divergence from economic consensus which expected further unemployment. Nonetheless, the jobless rate remains historically high at 13.3%.

INFLATION

POSITIVE

 The deflationary environment created by COVID-19 should provide additional room for robust stimulus from both fiscal and monetary policy initiatives. However, we will be watching closely in the intermediate term for second and third order effects leading to a return of inflationary pressure.

FISCAL POLICY

VERY POSITIVE

 The US Government has passed a series of fiscal measures to combat the economic impacts of the COVID-19 pandemic. The largest of these measures, known as the CARES Act, provides approximately $2.2 trillion of support for businesses and families that are impacted by business closures and unemployment.

MONETARY POLICY

VERY POSITIVE

 In response to the threat of COVID-19, the Federal Reserve has implemented two emergency rate cuts and has moved its target interest rate back to zero. Additionally, it has announced its intention to conduct further asset purchases to support markets. We believe that the Fed is doing all it can to support the economy and markets.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

 Western opposition to China’s National Security Law, legislation that reduces Hong Kong’s autonomy, has amplified the discord already present between the US and China as a result of COVID-19. In addition, demonstrations across the US evidence considerable domestic unrest.

ECONOMIC RISKS

VERY NEGATIVE

 The economic impacts of the COVID-19 pandemic are likely to be substantial. However, we believe that the eventual economic recovery (which will be aided by historically large economic stimulus) may occur more swiftly than from previous economic shocks.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.