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Midweek Report: The economy begins to stir

Midweek Report: The economy begins to stir

April 15, 2020

Yesterday saw the beginning of an articulation for a framework for opening the economy. At the national level, details remain very vague, while in California, Governor Newsom has imagined a very measured & gradual re-opening. While timing remains up in the air (though likely some time in late May)--the rigid operations described, particularly for restaurants, will likely prove difficult. All said, while Newsom's "dimmer" approach may prove hard on the economy in the short-term, it's hard to imagine that the ability to transact some business will create a worsened situation for restaurants & retail. Time will tell as more details emerge & other states begin to articulate their plans.

A historic earnings season also opened yesterday--historic because of the likely contractionary figures we are likely to see reported (such as those from JP Morgan yesterday).

Here's what I'm reading:

10 (Mostly New) Predictions For 2020 -- Robert Doll, Nuveen Investments

  • Every year, Robert Doll puts out his 10 predictions for the year and then "scores" himself throughout.
  • Given the magnitude of the virus shock, he has issued an update (promising to also keep himself honest on his original predictions as well).
  • They are:
  • 1. The U.S. and world experience a sharp, but reasonably short recession with noticeable recovery before year end.
    2. All-time low yields move higher during the second half, with the 10-year Treasury closing the year above 1%.
    3. Earnings collapse, but rise smartly by the fourth quarter.
    4. Stocks, bonds and cash all return less than 5% for only the fourth time in 25 years. (No change from original prediction.)
    5. The dollar weakens as global growth strengthens in the second half.
    6. Value and cyclicals outperform growth and defensive stocks in the second half.
    7. Financials, technology and health care outperform utilities, energy and materials in the second half.
    8. Active managers outperform their indexes for the first time in a decade. (No change from original prediction.)
    9. The cold wars within the U.S. and between the U.S. and China continue. (No change from original prediction.)
    10. The coronavirus recession and rise in unemployment cause Donald Trump to be a one-term president.

Why we are overweight U.S. stocks -- BlackRock

  • BlackRock discusses why their team is favoring US equities, while not abandoning global asset allocation. 
  • Government policy actions and relative quality of businesses make a good argument for the tilt.

Ben Bernanke Weighs In -- PIMCO

  • PIMCO hosted a call with the former Fed Chair & leaser who guided us through the 2008 financial crisis.
  • Bernanke touches on the similarities & differences between 2008 & the coronavirus shock.

 Robert Doll and Ben Bernanke are not affiliated with First Allied Securities, Inc.