LGT's Profit Sense

This week marked the first full week for Dallas County’s mandatory shelter-in-place order, issued by Judge Clay Jenkins on Sunday evening as our world continues to evolve and adapt during this unheard-of time. Almost every facet of life has been altered due to preventative measures as employees shift their workplace to a home office, restaurants modify their services, and children remain home from school. While the order was imminent and commendable to implement for Dallas, it points to a broader realization of how reactive, rather than proactive, not only Dallas but the entire nation has been on imposing effective action plans to cease the spread of the novel coronavirus (COVID-19). This is mostly due to the extended timeline of when an individual starts feeling symptoms, to being administered a test, to finally receiving the results - protocol is being implemented based on facts that could be days old. Similarly, the financial markets have reacted to the effects of COVID-19.

Investors and economists use leading indicators that point to future trends, and lagging indicators that confirm those patterns in order to formulate their economic outlook, ultimately influencing market sentiment. Leading indicators like bond yields, housing starts, and money supply can be difficult to decipher during the COVID-19 pandemic. Unlike usual recessionary trends, most of the recent market movements have been capricious, with the facts and preventative measures to combat the virus changing almost hourly. One key difference of the coronavirus-induced slowdown versus past true recessions is the unknown ending. Once contained the economy should be able to positively rebound quicker than compared to the Great Recession because businesses will be able to re-open, employees will be able to go back to work, and overall confidence will surface with the coronavirus fear mitigated. We are all hopeful that the coronavirus spread will soon be stopped and allow for healing to begin. Until then we must weather this storm by strictly adhering to the personal health and safety guidelines, and remaining diligent in investment plans that are in place for long-term financial health.

Monday’s historic equity market drop was due in part to the continued failure of the government to pass and enact a stimulus package for economic relief. Likewise, investors have become increasingly weary of investment-grade corporate and municipal bonds with fear of the backing entities defaulting, leading to mass selling and pushing the overall price lower. Throughout the week both have rallied on varying Federal Reserve and government actions. The Federal Reserve continues to aggressively implement their action plan by slashing the fed funds rate, increasing and diversifying their fixed income purchases, lowering the discount rate to banks for borrowing, and ensuring enough swap lines to prevent a US dollar shortage. Meanwhile, the government is nearing a final vote for the $2 trillion CARES Act, a stimulus agreement that includes, among many other provisions, payments to individuals, student loan payment suspension, unemployment benefits boost, and billons designated specifically for hospitals. The latest poignant lagging indicator came Thursday morning when the jobless claims report posted a record-setting 3.28 million unemployed individuals, compared to 282,000 claims the week before. Nevertheless, the markets seemed to shrug off the report by clawing back over $3 trillion in market value since the close on Monday.

As we continue to navigate these uncharted territories, LGT Financial Advisors wants to ensure you are healthy and safe. Our duty is to provide sound investment guidance and comprehensive financial planning through all stages of life, and with that comes a commitment to keeping your best interest in mind by education and communication for your overall safety. During these chaotic times is when it is of utmost importance to stay on guard by following CDC health guidelines, and remaining on high alert for potential fraudulent attacks. As always, if you have any questions or concerns please do not hesitate to contact us at any time.