Broker Check

Markets Try to Find Direction...& a framework for making financial decisions

April 09, 2020

The Federal Reserve got involved again announcing new measures to help in adding liquidity to the banking system--providing its own package of potential loans to municipalities & small/medium size businesses.  This should add more continued support for the economy--and markets are factoring this in adding to the continued optimism.

Throughout the last week I have gotten some client questions about financial decision-making for the short-term.  This is not only about adjustments to investments--it could include any long-term adjustments, like "should I adjust my retirement date?", "consider selling investment real estate?", "pay off debt?", etc.  For most of these questions I am suggesting a measured approach.

From the start, I have thought that most decisions should be held until we pass through 3 waypoints--The 1st being meaningful government stimulus (which we have gotten, though I do believe more will be necessary); the 2nd would be the announcement for some type of structure for a graduated re-start of the economy (the challenge here is that this is a two-fold framework--both a national & state-level plan); and the 3rd being that framework unfolding without meaningful uptick in virus cases.  I am under no illusions that this would be a "return to normal," however I do believe even a gradual re-opening of the economy puts us in a better position than today and begins to rebuild consumer confidence.  Neither the 2nd nor the 3rd waypoint should be rushed.

My counsel to clients looking to make some financial adjustments has been to wait at least until we pass waypoint two, but that it would be best to wait until we pass through all three.  Of course not all decisions can wait that long, so in some cases we work toward making the best decisions given the circumstances.

Below are some items I'm sharing from our research partners:

How large is the coronavirus macro shock? -- BlackRock Investment Institute

  • BlackRock provides some thoughts on measuring the longer-term impact of the virus shock on the economy.

  • While the expectation is for a short-term impact, the decrease in income for the year is expected to have influence on the trajectory of the economy.

  • Perhaps not all sectors of the economy will recover at the same rate, based upon how graduated of a re-start the economy gets.

10 Things You Should Know About the Relief Package -- Hartford Funds

Fed is on the Move Again -- Cetera Investment Management 

  • The Fed expanded its loans to small and midsize businesses as well as municipalities.

  • In addition, they will broaden their purchases to some high-yield bonds and commercial mortgage-backed securities.

  • The loan program, termed the “main street lending facility,” would allow these smaller businesses to pay between 2.5% to 4% above their short-term lending rate, which is zero.

Wishing you a restful holiday weekend.