Each day brings more news – some of it encouraging, some of it not – about our efforts to curtail the spread of COVID-19 and reopen the U.S. economy. Lawmakers at the federal, state and local levels are trying to find the appropriate time to reopen the economy, as well as ways to support people whose lives and livelihoods have been affected by the coronavirus pandemic.
We understand what an unsettling time this is, so want to share the latest insights on the economy and the financial markets from the strategists at Raymond James:
- While it may seem odd, the S&P 500 index just experienced its strongest 16-day period since 1938 as investors respond to unprecedented monetary and fiscal stimulus and discussions of reopening the economy, according to Raymond James Chief Investment Officer Larry Adam. “We believe the next up-leg in the equity rally will require more favorable news on the potential for a therapeutic, antibody or vaccine,” Adam said.
- Unemployment claims over the four-week period ending April 11 indicate much of the job creation since the 2008 financial crisis has been erased, Raymond James Chief Economist Scott Brown said. “While economic activity is expected to contract sharply in the second quarter of 2020, the recovery outlook is uncertain,” Brown said. “The economy will rebound, but a full economic recovery is expected to take time, and there will be long-lasting changes in consumer behavior and global trade.”
- A key to reopening the economy, according to Raymond James healthcare policy analyst Chris Meekins, is an increased capacity to test for the virus as a means to help combat spread. “As we approach another probable round of stimulus relief,” Meekins said, “we anticipate more funding for state and local governments to spur contact tracing and surveillance.”
- Investors continue to commit cash toward “risk-off” assets in the fixed income market, such as Treasuries, according to Raymond James Chief Fixed Income Strategist Kevin Giddis. The yield on the 10-year Treasury note is close to the 0.54% low reached on March 9, “and I would rather not test that if we can help it,” Giddis said, “because it would mean the confidence level is dropping.”
- While the recent market bounce has been impressive, uncertainty remains. There likely will be plenty of potential market-moving information to come in the days and weeks ahead. “Just as the 35% collapse in 26 days was too far, too fast, the rally has been, as well, in our view,” said Joey Madere, a senior portfolio strategist with the Raymond James Equity Portfolio & Technical Strategy group. “We would use pullbacks as opportunities to accumulate stocks for the long term.”
As we all gain our bearings, we’ll continue to keep you updated with relevant information. Meanwhile, you can find the latest on the coronavirus and market volatility here.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.
Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.
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