Weekly Economic Update: March 2020

Wednesday, March 25, 2020

Economic Update for the week of March 23rd, 2020

In this week’s recap: Coronavirus continues to drive the markets, even as bankers and health professionals take decisive steps to stem the tide.

Weekly Economic Update

Presented by Troy L Thompson, CFP March 23, 2020

THE WEEK ON WALL STREET

The stock market suffered through another volatile week as it wrestled with the health and economic fallout of the domestic spread of the coronavirus. Swift and decisive actions by the Federal Reserve and policy responses from the federal government did not keep stocks from recording losses for the week.

The Dow Jones Industrial Average slumped 17.3%, while the Standard & Poor 500 lost 14.98%. The Nasdaq Composite index declined 12.64% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 6.64%.^1-3

Stocks Slide Further

The stock market continued its retreat amid fears of a darkening economic impact from the coronavirus pandemic. Despite a Sunday night announcement by the Federal Reserve that it was cutting its benchmark interest rate by 100 basis points to nearly zero and taking steps to increase market liquidity, stocks opened the week sharply lower, setting the stage for another difficult week for investors.⁴

Progress was reported on coronavirus testing capacity and on the efforts to combat the infection. At the same time, Washington, D.C., advanced legislation to provide financial assistance to unemployed workers and affected businesses. Neither did much to help investor anxieties, however. Stocks slid in the closing hours of the trading week, leaving stock indices near their lows of the week.⁵

Central Bankers Go Big

The response of global central bankers to mitigate the economic impact of the coronavirus has been broad ranging. In addition to its 100 basis point cut in the federal funds rate, the Federal Reserve also took actions to provide additional credit access to banks, committed to buy at least $700 billion in Treasury and mortgage bonds, and set up a new lending facility to backstop money market funds.⁶

The European Central Bank also announced an $800 billion-plus bond buying program to support member economies. The Bank of England cut its benchmark lending rate to 0.1% and pledged to buy over $200 billion in government and investment grade corporate bonds, while the Bank of Japan said that it would double its purchases of stocks and increase loans to businesses.^7-9

Final Thought

Investors are struggling with answers to two unknowns: the trajectory of the coronavirus spread and its economic cost. With coronavirus testing beginning to ramp up, these numbers may begin drawing a firmer picture of the growth of coronavirus infections in the U.S. Economic indicators, such as jobless claims for unemployment insurance and the Index of Leading Economic Indicators, may provide clues regarding the economy.

T I P O F T H E W E E K

Federal student loans may offer 6-month grace periods before any repayment is necessary, but having an income-based repayment plan in place soon after graduation is wise. Repayments can be limited to affordable amounts through these plans.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: New Home Sales.

Wednesday: Durable Goods Orders.

Thursday: 4^th-quarter GDP (Gross Domestic Product) Report. Jobless Claims for Unemployment.

Friday: Consumer Sentiment.

Source: Econoday, March 20, 2020

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Nike (NKE), Carnival Corp. (CCL).

Wednesday: Micron Technologies (MU).

Thursday: Lululemon (LULU), KB Home (KBH).

Source: Zacks, March 20, 2020

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Q U O T E O F T H E W E E K

“I'd take the awe of understanding over the awe of ignorance any day.”

DOUGLAS ADAMS

T H E W E E K L Y R I D D L E

A man pocketed it and took it home, intending to eat it. He put it on a shelf, but three days later, it walked away. What was it?

LAST WEEK’S RIDDLE: What can fill a room, yet takes up no physical space?

ANSWER: Light.

Troy L Thompson, CFP may be reached at 515-432-5421 or troy@thompsonfinancialinc.com
www.thompsonfinancialinc.com

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Troy Thompson, CFP

DBA Thompson Financial and Hanson Asset Strategies

Securities offered through FIRST HEARTLAND CAPITAL, INC. Member FINRA & SIPC.

Thompson Financial is not affiliated with FIRST HEARTLAND CAPITAL, INC.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.

CITATIONS:

1 – The Wall Street Journal, March 20, 2020
2 – The Wall Street Journal, March 20, 2020
3 – The Wall Street Journal, March 20, 2020
4 – CNBC.com, March 15, 2020
5 – CNBC.com, March 20, 2020
6 – The Wall Street Journal, March 19, 2020
7 – CNBC.com, March 19, 2020
8 – Pension & Investments, March 19, 2020
9 – Financial Times, March 16, 2020

CHART CITATIONS:

The Wall Street Journal, March 20, 2020
The Wall Street Journal, March 20, 2020
Treasury.gov, March 20, 2020

Wednesday, March 18, 2020

Economic Update for the week of March 18th, 2020

In this week’s recap: Continuing concerns over COVID-19, aided by cuts in oil production overseas, contributed to continued market volatility.

Weekly Economic Update

Presented by Troy L Thompson, CFP March 18, 2020

THE WEEK ON WALL STREET

Markets remained exceptionally volatile, buffeted by the spreading impact of coronavirus, uncertain responses from federal policymakers, and the sudden drop in oil prices.

The Dow Jones Industrial Average fell 10.36%, while the S&P 500 declined 8.79%. The Nasdaq Composite index slid 8.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 17.75%.^1,2

Markets Grapple with Uncertainty

A dispute between Saudi Arabia and Russia over oil production cuts, mounting fears of the coronavirus, the declaration of the COVID-19 as a global pandemic by the World Health Organization, and the news of a travel ban from Europe unsettled markets throughout the week.

Stock trading was halted twice by circuit breakers, which are designed to briefly stop trading when losses in the S&P 500 reach 7%. Stocks sold off sharply Thursday before ending a tumultuous week with a strong rebound on Friday.³

Troubles in the Oil Patch

The failure of Russia to join Saudi Arabia in supporting lower oil production targets left Saudi Arabia fuming. In response, Saudi Arabia announced its intention to raise oil output.

Oil prices plummeted on the news, contributing to the stock market’s drop on Monday. While lower oil prices may represent a boon to consumers in the form of lower gasoline prices and relief to companies with high energy consumption (e.g., airlines, chemical), they also pose a risk to the American energy industry. If low oil prices persist, it may lead to lower capital expenditures and potential issues in the credit markets as less-well-capitalized companies struggle to manage their debt obligations.⁴

Final Thought

The world’s central bankers have already taken several steps to combat the economic impact of the coronavirus, including lowering short-term interest rates. The financial markets are now looking for a response from the U.S. government. In evaluating any actions from the federal government, investors may focus on the size and timing of policy proposals to determine if they can reduce current levels of economic uncertainty.

T I P O F T H E W E E K

Are you in your fifties and providing eldercare to one or both of your parents? As you help them in their retirements, remember not to neglect your own retirement planning, as these years of your life are among the most important for that effort.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Retail Sales, JOLTS Report (Job Openings and Labor Turnover Survey), Industrial Production

Wednesday: Housing Starts, FOMC (Federal Open Market Committee) Announcement

Thursday: Leading Economic Indicators

Friday: Existing Home Sales

Source: Econoday, March 13, 2020

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Coupa Software (Coup)

Tuesday: FedEx Corp. (FDX), MongoDB (MDB)

Wednesday: General Mills (GIS), Ctrip.com (TCOM)

Thursday: Tencent Holdings (TCEHY), Lennar (LEN)

Friday: Tiffany & Co. (TIF), BMW (BAMXF)

Source: Zacks, March 13, 2020

Q U O T E O F T H E W E E K

“Character is the virtue of hard times.”

CHARLES DE GAULLE

T H E W E E K L Y R I D D L E

What can fill a room, yet takes up no physical space?

LAST WEEK’S RIDDLE: A man says that where he lives, 1,500 plus 20 and 1,600 minus 40 equal the same thing, and his neighbors and coworkers all agree. Where is he living?

ANSWER: On a military base.