Business and Market Update – March 27, 2020

Upcoming data will indicate the sky is falling…

We are starting to receive economic data reflecting the impact of COVID-19 on the US economy.  For example, unemployment claims for the week ending 3/20/20 were recently reported and came in at over 3.2 million.  Is the sky falling?

It will be difficult to put into context near term economic statistics that are just now being released, such as unemployment, the rate of change in GDP, etc., until we have more data points.  What we do know is that the results will be dramatically worse than anything we have ever seen or could have imagined prior to the pandemic.  For example, a majority of our economy has come to a sudden halt.  This is far different from other periods when economic activity weakened over a period of months or years.  Moreover, even if the pandemic is relatively short-lived,  we will likely be in a recession prior to the release of sufficient economic data confirming as much.  The expected recovery will also be in place before the data catches up to reality.

Economists and industry pundits will be grasping at straws in their attempt to predict future results and put them in a context which does not exist.  Worse yet, the news media will analyze these results “ad nauseam” in their need to fill air time in between commercial breaks.  In reality, it will take many months before we have sufficient data to help us frame the severity of the current environment and a perspective of when the economic recovery is likely to emerge.

During the interim, try not to get drawn into the daily and often-conflicting soundbites of mainstream media.  Prepare yourself that the economy is going to worsen before it rebounds.  Do not succumb to the fear that the sky is falling.  The sky is not falling.  Our economy was strong prior to COVID-19 and will recover.

As always, all comments and questions are welcome.

Denise M. Farkas, CFA
Chief Investment Officer