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Midweek Report: Negative GDP growth

Midweek Report: Negative GDP growth

April 29, 2020

With negative growth for the last quarter now official, the case is made that we are officially in recession. It's important to keep in mind that this recession is due to a man-made shutdown of the economy. The way out will be through a staged re-opening that is entirely unclear at the moment.

That being said, investment markets are mechanisms for rapidly digesting large volumes of new information into asset prices. The market is forward looking in its view of this information.  So far, April has provided the best US monthly market performance since 1974. While questions remain on re-opening the economy, it seems that (so far) markets believe the pullback may have been initially overshot.  This is not to say markets cannot reverse course & head lower; or that we are "out of the woods" economically speaking.  However, the news around unemployment & earnings (both lagging indicators) has been consistently awful in April and markets keep shrugging it far.

Here's what I'm reading this week:

Weekly Commentary -- BlackRock

  • The overwhelming policy response to cushion the coronavirus shock is set to prevent a repeat of the 2008 financial crisis, but execution is key.

  • Oil prices slumped to historic levels, as a huge demand shortfall has squeezed the limited storage capacity.

  • This week’s U.S. consumer confidence data will shed light on how much impact the containment measures have hit consumer spending.

Timing the Market Is Impossible -- Hartford Funds

  • Hartford reminds us of the difficulties of timing the market
  • 74% of the stock market’s best days occur during a bear market or during the first two months of a bull market.

    If you missed the market’s 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 80%.

    QE Infinity & Beyond -- First Trust Economics Blog 

    The Federal Reserve has been extremely aggressive since the Coronavirus and related shutdowns hit the US economy and made it clear today that it will continue to be so until the US economy has gotten back on its feet.