SAVE THE DATE! JUNE 30 – Wealth Management Trends Webinar (11 AM)
Presented by Matt Petrozelli, VNFA President & CEO and Gabe Muller, Senior Consultant at Springboard Advisory Group
TOPICS:
– Strategies to navigate the
“superstore” of options trending in wealth management.
– Understanding the different types of
financial professionals and their business models.
– The modern client experience and
client-advisor relationship – what to expect now and next.
– Digital and distanced… how to seek
financial advice during the COVID-19 global pandemic. REGISTER
NOW – https://attendee.gotowebinar.com/register/7431122311571275021
Several authoritative institutions
released troubling economic forecasts last week, as the Fed, the World Bank and
the OECD all reiterated that 2020 will represent one of worst downturns in
modern times. To counter, Chairman Powell shared that the FOMC is “not even
thinking about thinking about raising rates.” This exemplifies the seesaw
between novel monetary policy and extraordinary economic conditions that is
likely to steer asset prices for the visible future. The present climate is so
unusual in that the key variables determining economic health – virus-related
shutdowns and the corresponding monetary stimulus – are both inorganic
mechanisms; a massive external shock has been met with a previously
unimaginable flood of money into the financial system. We continue to observe
the phenomena closely in order to best align long-term financial plans with the
ongoing developments.
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
Social distancing has slackened in recent weeks as states reopen, Americans appear increasingly comfortable with travel and large gatherings occur via demonstrations. The extent to which these events will impact the spread of COVID-19, and thereby economic activity, will be discerned over the coming weeks.
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.
Laurie has returned to the studio which means she can
take your questions live on the air at 610-758-8810, or address those submitted
via yourfinancialchoices.com.
