by Connor Darrell CFA, Assistant Vice President – Head of Investments
Stocks and bonds in the U.S. were largely unchanged week over week, although international equities in both developed and emerging markets managed to generate relatively robust returns as efforts to reopen economies continued. Investors also got their first look at a very ugly Q1 GDP figure, which came in at its lowest level since the Global Financial Crisis. Q1 GDP, which declined at an annualized 4.8% rate despite containing over two months of relatively stable economic activity, is expected to pale in comparison to the contraction anticipated for Q2. Though estimates are extremely difficult at this point in time, some economists are calling for Q2 annualized declines of up to 40% (although these estimates vary wildly depending upon the source). Unemployment data is expected to be equally bad, with some calling for that figure to reach as high as 20%.

Three of the world’s major central banks (the Federal Reserve, the ECB, and the Bank of Japan) held press conferences last week and announced continued adjustments to their respective policy initiatives. “Flexibility” was the theme of the week, as bankers hinted that they would be looking to do all that is necessary to preserve liquidity in markets and keep capital flowing to where it is needed. In the U.S., Fed Chairman Jerome Powell announced a further expansion of the bank’s “main street lending program,” making it available to more businesses and lowering the minimum loan size.

Also offsetting some of the market’s ire over the economic data were reports that an antiviral drug developed by Gilead Sciences was showing some promise in clinical trials. The preliminary clinical trials for Remdesivir (as the drug is called) were discussed in detail by Dr. Anthony Fauci during his daily press conferences last week. Dr. Fauci’s apparent confidence in the drug’s promise was quickly followed by announcements that the FDA would likely fast track its path to broader use in severe cases of COVID-19. It is important to note that the drug does not represent a cure for the disease, but it may help to improve patient outcomes. As the scientific community around the world remains fully mobilized, we expect that this will not be the last of promising developments with respect to our ability to fight the virus. However, an effective and well distributed vaccine will likely be required before we can finally put the COVID-19 pandemic behind us.