The Numbers & “Heat Map”

THE NUMBERS
30-year mortgage rate is as of 8/28/20.

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

GDP declined at an annualized rate of 32.9% in Q2, the fourth-largest fall in the last 100 years. Although the figure is staggering, it was in-line with economists’ expectations. Retail sales increased 1.2% in July, a healthy mid-pandemic result, but sharply below June’s 7.5% rise.

CORPORATE EARNINGS

VERY NEGATIVE

S&P 500 earnings fell by around 33% in Q2, the sharpest year-over-year decline since 2008. However, some companies in certain sectors have reported strong results, such as in Retail and Cloud Computing.

EMPLOYMENT

VERY NEGATIVE

About 1.4 million U.S. jobs were added in August, in-line with market expectations. The American economy has now added back roughly half of the 22 million jobs lost since March. The unemployment rate remains well above historical averages, at 8.4%.

INFLATION

POSITIVE

Core inflation increased 0.6% in July; the largest one-month jump since 1991. However, on an annualized basis, CPI is running at a moderate 1.6%, below the Fed’s 2% target. More sustained indications of inflation will be necessary before the central bank curbs its stimulative policies.

FISCAL POLICY

VERY POSITIVE

Weekly unemployment benefits are now being disseminated on a state-by-state basis, through applications to a Federal slush fund, and total $300 per week, versus the previous rate of $600 under the now-expired Federal plan.

MONETARY POLICY

VERY POSITIVE

The Federal Reserve has supported asset markets with unprecedented speed and magnitude in response to COVID-19. In our view, Fed President, Jay Powell, reaffirmed the central bank’s accomodative stance in his virtual address “at Jackson Hole”.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

VERY NEGATIVE

The relationship between the US and China, the world’s two largest economies, was already weakened by the trade war but has deteriorated further as a result of COVID-19.

ECONOMIC RISKS

VERY NEGATIVE

The impacts from COVID-19 were as swift and pronounced as any shock in modern times. Robust monetary and fiscal stimulus stabilized the system, however, economic activity remains well-below that in 2019, and uncertainty remains high.

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.

Did You Know…?

Q3 Estimated Tax Payment Reminder
Third quarter estimated tax payments are due September 15, 2020.  These estimates may include federal, state and/or local vouchers depending on your situation.

If quarterly estimates were recommended when we prepared your 2019 return, they would be included with your tax return.  If you requested a paper client copy of your return, the instructions, vouchers and envelopes were included with your tax folder. If you requested an electronic client copy, the instructions and vouchers were included in both the client copy and action needed copy posted to your client portal. 

Please follow the applicable instructions previously provided to mail your payment and voucher by September 15, 2020.

There may be situations where the estimates were generated, but an overpayment was applied in full or in part. If your income or withholdings have significantly changed since last year, please contact your tax preparer to review. If you change or do not make the estimates, please let your tax preparer know at tax filing time.