Fiduciary Wealth Management 2020 Mid-Year Update

Fiduciary Wealth Management 2020 Mid-Year Update

| July 20, 2020
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A few weeks ago my wife Tiffany and I took a quick trip down to Lake Ouachita.  The coolers were packed, sunscreen (check), and the weather forecast showed only a slight chance of rain that day. We were excited about our first kid free getaway since the COVID-19 pandemic began a few months ago. The day started off great and the weather was perfect but about an hour after we hit the water the sky started to turn gloomy. The next few hours consisted of dodging pop up thunderstorms and high wind before ultimately heading back to the marina in pouring down rain. We laughed about it the entire time but made the best of a pretty lousy day. We made it back to the car completely drenched and Tiffany turned to me and said, “This is so 2020”.  

The first several weeks of 2020 were moving along nicely with little indication of the daunting events that would emerge from a global health pandemic. Suddenly in the blink of an eye, the world was turned upside down by COVID-19. While the coronavirus pandemic is a healthcare issue, the downstream effects on other aspects of our society have been significant, perhaps the greatest being on the economy. As we reach the mid-year point of 2020, let’s take a look at what is going on in the economy and markets.  

Economic Headaches

The National Bureau of Economic Research (NBER) officially called the recession after the longest expansion (128 months) in US History.  Per the NBER, the US entered a recession in February 2020. (1) The unemployment rate has surged to record levels and more than 40 million applications have been filed for unemployment benefits. (2)  It goes without saying that these kinds of unemployment numbers will have a severe impact on the economy.  

When we analyze past quarterly GDP numbers, the standout for most was the Great Recession of 2008 where we saw fourth quarter GDP -8.9%. (3) It’s hard not to forget the dire times we saw during the end of 2008. I will certainly never forget the stress of managing client portfolios through those turbulent times. To put things into prospective, recent GDP estimates for second quarter 2020 are at -34.7%. (4) It’s important to remember that this upcoming quarterly GDP number is not a result of a normal economic contraction but rather the forced shutdown of many aspects of our economy due to the coronavirus pandemic.  

As the country eases out of lockdown and restrictions are being loosened, there has been an immediate uptick in economic activity, though not anywhere close to the levels pre COVID-19. It remains to be seen if the recent surge in cases around the US will derail recovery efforts.  It’s common to hear economists refer to the upcoming recovery as “V-shaped” or “U-shaped”.  The predictions are far and wide but it’s pretty certain that economic activity will show a dramatic snap back as the reopening occurs across the US. However, the increase after this initial upturn may be a bit more subdued given any potential increase in virus cases around the country as well as uncertainty about an effective vaccine.  

Stock Market Whiplash

The year was off to a great start following the momentum of the 2019 gains we saw in equity markets.  The broader US equity market, as measured by the S&P 500, peaked around mid-February. Things quickly turned south as the COVID-19 pandemic took hold in the US. In a little over a month, the index fell 34%, bottoming out on March 23. This move down was extreme by all measures in such a short period of time. It reminded me of the type of volatility we saw during the 08-09 time period. It’s been a bumpy ride, but the S&P 500 has retraced an impressive 35.2% since the March 23rd lows. As of the mid-year mark the S&P 500 had its biggest one-quarter surge since the fourth quarter of 1998. (5) Here are return numbers for major indexes through the 2nd quarter of 2020:

S&P500                     -3.1% 

Russell 2000             -13.0%

MSCI EAFE               -11.1%

MSCI EM                  -9.7%

Barclays Aggregate   +6.1%

Data: All Returns in USD as of 06/30/2020

J.P. Morgan Asset Management 

“The Fed Put” 

If you were following the economic situation early on, you may have heard the term “The Fed Put”. I’ve had a few clients and friends ask me about this term and, to put it simply, it’s the power of the Federal Reserve to put a backstop to falling asset prices. The Federal Reserve stepped up early on in the pandemic to slash rates aggressively. It has also worked hard to provide financing for struggling businesses through the Main Street Lending Program.  

In addition, Congress passed a number of bills to aid both individuals and organizations, the largest being the $2 trillion CARES Act, which was signed into law on March 27. The Act provided individual stimulus checks, enhanced unemployment benefits, and loan programs to help businesses. Despite extreme actions taken by both the Federal Reserve and the federal government, some economists still say that they will need to do more before a meaningful recovery will take hold. (6)

What Does This Mean For You? 

This year has been anything but normal so far, and it’s likely we continue to see more volatility throughout the summer and as we enter fall. While the global economy is still gaining its foothold, it is not the end of the world. We may have some hard times ahead of us, but it isn’t the first time our nation has faced adversity. 

While our economic woes may not be new for history, they could be new for you. In difficult times like these, it is helpful to have a trusted advisor that you can turn to for financial guidance and support. You don’t need to go through this economic crisis alone; I am here for you. Schedule a phone call now so we can have a conversation about where you are and how we may be able to help.

About Rocklin Senavinin, CFP®

With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.

DISCLOSURES 

The views expressed represent the opinions of Fiduciary Wealth Management, LLC and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person.

Additional information about Fiduciary Wealth Management, LLC is also available on the SEC’s website at https://www.adviserinfo.sec.gov/Firm/284324. Please call or email with questions.

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(1) https://www.wsj.com/articles/recession-in-u-s-began-in-february-nber-panel-says-11591636626

(2) https://fortune.com/2020/05/28/us-unemployment-rate-numbers-claims-this-week-total-job-losses-may-28-2020-benefits-claims-job-losses/

(3) https://www.treasury.gov/resource-center/data-chart-center/Documents/20120502_EconomicGrowth.pdf

(4) https://www.frbatlanta.org/cqer/research/gdpnow#:~:text=Latest%20estimate%3A%20%2D39.5%20percent%20%E2%80%94,46.6%20percent%20on%20June%2025.

(5) https://www.cnbc.com/2020/06/29/stock-market-futures-open-to-close-news.html

(6) https://www.marketwatch.com/story/feds-beige-book-says-businesses-are-pessimistic-about-pace-of-a-recovery-2020-05-27

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