Stocks fell into the close today on bleak statements from Fed Chair Jerome Powell this morning in an online speech. He described the future as "highly uncertain and subject to significant downside risks," urging the White House and Congress to provide more stimulus. Its worth noting that the U.S. federal deficit skyrocketed 3/4ths of a trillion in one month as initial stimulus was rolled out. Powell also predicted a slower economic recovery than we had hoped which aligns with some alarming potential indicators. Core CPI saw its sharpest decline in decades, and a look at the correlation between unemployment and mortgage delinquencies may be signaling a more systemic disaster for the banking sector. This is why some lawmakers are eager to reopen the economy but the concerns of a second wave of coronavirus might keep consumers at home regardless. And a second wave of coronavirus outbreaks seems to be on equity investors minds as well as a recent poll cited this as the top concern among equity investors. This is certainly an unprecedented situation... which has led to an "unprecedented use of the word unprecedented" according to Google search volume.
1. Markets love to climb a wall or worry...
Source: WSJ Daily Shot, from 5/12/20
2. COVID-19 induced closures are forcing many industries to cut prices. Will this be a boon for consumers with pent-up demand?
Source: WSJ Daily Shot, from 5/13/20
3. As the stimulus packages were implemented, the U.S. Federal deficit shattered the old records...increasing by 3/4s of a trillion in one month.
Source: WSJ Daily Shot, from 5/13/20
4. Unlike the Federal Governments, States are required by law to have balanced budgets.
Source: WSJ Daily Shot, from 5/13/20
5. All government and corporate debt levels around the globe are dramatically increasing to finance COVID-19 revenue shortfalls. Here is China:
Source: WSJ Daily Shot, from 5/13/20
6. Refinancing will help the consumer, but it is hard to do without a job...
Source: WSJ Daily Shot, from 5/13/20
7. Mortgage forbearance has risen form less than 1% to 6-11%...
Source: WSJ Daily Shot, from 5/12/20
8. Recent unemployment figures may be a leading indicator… Are delinquencies in mortgages, and other types of debt such as business loans, student loans, credit cards, etc., going to cause systemic issues for the banks?
Source: WSJ Daily Shot, from 5/13/20
9. Similar to the large banks, U.S. regional bank loan loss provisions are now higher than during the Great Recession.
Source: WSJ Daily Shot, from 5/11/20
10. Unparalleled, exceptional, extraordinary, unique, record...
Source: WSJ Daily Shot, from 5/7/20
TUNE IN Tomorrow @10AM EST to hear BCM's Portfolio Manager and Managing Partner, David Haviland, talk with Kevin O'Leary, investor on ABC's Shark Tank and chairman of O'Shares ETFs as well as Connor O'Brien, CEO of O'Shares Investments about:
- An update on markets. What’s the Latest?
- Dividend Stocks and Strategies. Why Quality Matters and Can Potentially Reduce Risk
- Using Rules-Based Investments. Why Rules-Based Can Help in Markets Like This One
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.
