The Lifeblood of the US Economy

| May 24, 2020
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The economic struggles in our country are among the worst we’ve ever seen. In April, a record 20 million people lost their jobs, and 36 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March.

Record drops in consumer confidence, manufacturing, and spending are all adding to the immediate economic fallout. Specific industries have been devastated, with names like J.C. Penney, J.Crew, and Neiman Marcus filing for bankruptcy.

Clothing sales are down 89%, furniture sales down 66%, and restaurant sales down 49% from this time last year, according to the United States Census Bureau. Yet, as F. Scott Fitzgerald wrote, these many single defeats won’t necessarily add up to the final defeat.

Our country has survived many trying times before, and we are starting to see glimmers of hope on both the medical and economic fronts. Our resolve and fortitude will once again shine, as we head toward better times in the second half of 2020.

More testing for COVID-19 is needed to help identify infected people and to stop the virus from spreading. As testing has soared, the number of positive COVID-19 results as a percentage of total tests has trended lower, and that percentage consistently has been beneath 10%, according to data from the COVID Tracking Project   https://covidtracking.com/ .

In addition, doctors have developed a “toolbox” of drugs to help provide patients a better chance at survival. Antiviral drugs like remdesivir in combination with other drugs are showing significantly better results now than just a few weeks ago.

The World Health Organization has reported “potentially positive data” in several treatments. Although a vaccine could still be a year or more away, human drug trials are underway with encouraging initial results.

In the face of the devastating loss of human life and historically weak economic data, however, the S&P 500 Index has experienced one of its greatest short-term rallies ever, up more than 30% from the March 23 lows at its recent peak.  All major S&P 500 bear markets in the past 60 years had a significant bounce off the market lows, followed by a correction of about 10% on average before another surge higher.

While current economic data may sound bad, it’s important to remember it is backward-looking. Real-time economic data points such as public transportation, traveler data from the Transportation Security Administration, fuel sales, railroad traffic, and federal tax withholding are all showing improvement as the economy begins to re-open.

Finally, small businesses are the lifeblood of the US economy, and the Bureau of Labor Statistics shows they employ 47% of all private sector jobs. Recent data showed small businesses are as optimistic about the next six months as they’ve been in 18 months, suggesting the worst may be behind us, and a growing demand for their products and services could be brewing.

The pain from this recession is impacting all of us, but we’ll remain cautiously optimistic that our communities, our States and our Nation can find a way to thrive even in the face of such adversity.

Stay safe, and don’t hesitate to contact me if you have any questions or concerns.

Sincerely,

Bryan Foronjy, CFP®

Founder and Principal Wealth Manager

Foronjy Financial

CA Insurance Lic. # 0F84170

www.foronjyfinancial.com

 

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Bryan Foronjy is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group LLC, a registered investment advisor.  Strategic Wealth Advisors Group LLC and Foronjy Financial are separate entities from LPL Financial.

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Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of May 19, 2020.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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