Developments - COVID 19

Dear Clients and Friends,

In just a matter of days, it seems, our lives have changed dramatically as we attempt to diminish the spread of COVID-19. We hope you and your loved ones are safe and well. With so much happening in a relatively short span of time, we believe it’s important to offer our clients as much perspective as possible on the financial markets.

The economic effects of COVID-19 have accelerated quickly and the financial markets are experiencing heightened and extreme volatility. The major U.S. stock indices rise on positive news, such as the president’s call on Tuesday for lawmakers to pump $1 trillion into the economy, and fall when action does not come swiftly or new concerns emerge. On Wednesday and today, sharp declines triggered a so-called circuit breaker, briefly pausing market-wide trading.

Congress is working on a fiscal stimulus package. The U.S. Federal Reserve has cut its overnight lending rate to essentially 0% and restarted asset purchases, a process called quantitative easing. More importantly, the central bank has made other efforts to boost liquidity and to encourage banks to work with borrowers and use their capital buffers to ease credit strains.

“The biggest point we can make is to have patience and stay calm,” Raymond James Chief Investment Officer Larry Adam said. “There is significant fiscal stimulus coming.” The fiscal stimulus discussion includes direct cash payments to individuals, support for small business loans, industry relief for airlines and hotels, other industry support such as tax credits, and changes to health programs, according to Raymond James Washington Policy Analyst Ed Mills. This stimulus is massive and will have a substantive effect once markets have time to reflect and uncertainty diminishes.

Raymond James Chief Economist Scott Brown anticipates there will be a decline in U.S. gross domestic product in the first and second quarters of 2020, though precise projections are challenging to make. “Economic growth projections have been revised lower day by day and at this point are meaningless,” Brown said. “We do know the impact will be large and unprecedented. The key factors are how much of a hit the economy experiences, how long extreme social distancing lasts, and whether there will be long-term changes in consumer behavior.”

Despite some anomalies, including pricing volatility, fixed income (Bonds) held in portfolios should maintain stable cash flows and income streams.”

Mike Gibbs, managing director of Raymond James Equity Portfolio & Technical Strategy, maintains caution for equity markets in the near term, but believes the rapid decline that has already taken place will present an opportunity for longer-term investors. “The Fed is providing the liquidity necessary to ensure the financial markets continue to function properly,” Gibbs said. “The potential for a massive fiscal stimulus package will help cushion the blow we are going to see in the U.S. economy in the next several weeks and possibly months.”

As for our office, some things are changing to adapt to current circumstances. We have begun limiting visitors out of an abundance of caution for our clients and our associates. For the time being, we plan to rely on phone and web conferencing to stay in contact with valued clients, like you. However, we are open, will remain open and actively at work managing through developments in real time…

Some positives that we feel are underreported-

  • The US Healthcare System is the best in the world- we sit at a significant advantage to other countries’ experiences
  • A wave of recoveries is on the horizon- fear will abate as numbers plateau
  • Testing capacity and turnaround times will allow better and accurate data to overcome the current uncertainties

Panic is never permanent but also never should be underestimated in the short term. Sentiment may worsen before it improves. Every day we will learn more, progress will be made, uncertainty will yield to facts and reason. In due time, as in every other crisis in our country’s history, the “owners” of property, stocks, bonds, businesses and enterprises will recover their short-term losses. In capitalism, being an “owner” at times like this can shake the faith and foundations of the most educated, experienced, and astute investors. This shall pass…

Know, too, that we are right beside you, ready to listen, offer a balanced perspective and give any support you may need. Our focus is on promoting your physical and financial well-being in helpful and pragmatic ways.

If you have any questions or need special assistance, please reach out to us or any member of the team.

Thank you for your trust,
The Legacy Team

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of The Legacy Team and not necessarily those of Raymond James. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.