At the midpoint of 2020 were mindful that its been an extremely challenging year so far in the United States and around the globe. Were in the midst of a pandemic that continues to impact all of us our communities and our economies.
Together were looking ahead for new ways to face these challenges and how we can prepare now for better times. Weve been impressed by what weve seen so far. The resiliency and accelerated innovation among large and small US businesses; efforts by our national, state, and local governments to support our communities; and most of all, the dedication and unprecedented cooperation among our front-line health professionals medical researchers and everyday people to guide us through this health crisis.
At Foronjy Financial, we know the stock market is forward-looking: It focuses on what’s happening today and what it sees on the path ahead. Much of the real-time economic data we follow—such as transportation activity, home sales, and jobless claims—is showing tangible evidence that economic activity—while still depressed—has begun to make a comeback.
Our expectations for a gradual economic recovery in the second half of 2020 appear to be in conflict with the S&P 500’s rapid ascent over the 12 weeks from March to June. On one hand, gains may appear appropriate based on the likelihood that the recession—officially declared on June 8—may be the shortest ever, aided by the massive stimulus response by policymakers and initial progress toward a vaccine.
On the other hand, the risk of a second wave of COVID-19 remains, particularly as some southern and western states have seen increases in infections and hospitalizations. In addition, some of the 20 million jobs lost in March and April, as reported by the US Department of Labor, will take a while to come back due to social-distancing constraints and the potential for lasting changes in consumer behavior.
The path of the economy over the rest of 2020 depends on whether COVID-19 infection rates and hospitalizations fall, facilitating more and faster business re-openings and a return to more normal consumer behavior.
Alternatively, a potential second wave of the virus could lead to lockdowns being put back in place and consumers staying home. This recession has been led by consumers, and consumers—with help from the government and medical professionals—will have to lead us out.
It’s still going to be a challenging environment with significant uncertainty that may lead to more volatility for the next few months. Still, we continue to encourage investors to focus on the fundamental drivers of investment returns and their
long-term financial goals.