COVID-19: Coronavirus Coverage

Our ears are ringing as the iconic bell on the New York Stock Exchange is dinging – in person – once again! This week, Governor Andrew Cuomo had the honor of reopening the trading floor for the first time in two months, but of course, there were a few new rules in place.

With the release of this morning's report on April Personal Incomes and Outlays, we can now take a closer look at "Real" Disposable Personal Income Per Capita. At two decimal places, the nominal 12.83% month-over-month change in disposable income was at 13.36% when we adjust for inflation. This is an increase from last month's 2.1% nominal and 1.9% real decreases last month. The year-over-year metrics are 13.8% nominal and 13.2% real.

It may surprise some investors to learn that the leverage profile of emerging market (EM) corporations appears to be in better shape than that of their US counterparts. Maybe it’s a matter of “been there, done that.”

In order to sustain this population and our growing demand for resource-intensive animal-based foods, the World Resources Institute estimates that crop production will need to increase by 56% from a 2010 baseline.

The latest Chicago Purchasing Manager's Index, or the Chicago Business Barometer, fell to 32.2 in May from 35.4 in April, which is in contraction territory. Values above 50.0 indicate expanding manufacturing activity.

The European Commission has unveiled a sweeping new €750 billion coronavirus fiscal rescue package, including the issuance of new bonds. David Zahn, our Head of European Fixed Income, calls it groundbreaking.

As we look at emerging from the coronavirus pandemic, it is now becoming clear that there may be some long-lasting impacts to the world that will affect politics, economics and investments. Are we heading towards a world of two asset classes: the U.S. and China?

The latest index came in at -19, up 11 from last month's -30, which indicates contraction in May, but improvement. The future outlook increased from -6 last month to -2 this month. Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

This morning's seasonally adjusted 2.123M new claims, down 323K from the previous week's revised figure, was slightly worse than the Investing.com forecast of 2.1M.

Tensions between the US and China are flaring up again. With pressure mounting on Chinese stocks listed in the US, including those widely held in emerging-market portfolios, investors need to consider how to prepare for the mounting risks.

Investors are betting on growth stocks over value stocks by a wider spread right now than at any other time since at least 1990, including during the tech bubble.

But some financial-services companies are using the disruption to fill key roles and bolster businesses.

Today the National Association of Realtors released the April data for their Pending Home Sales Index. According to the National Association of Realtors®, "Brought on by the coronavirus pandemic, pending home sales decreased in April, making two straight months of declines."

The Bureau of Labor Statistics reports that all 50 states experienced a decrease in payrolls and an increase in unemployment in April.

Chinese stocks have been resilient this year because of relatively modest earnings downgrades amid an early recovery from the virus-induced shock.

Like most asset classes, mortgage-backed securities (MBS) have seen heightened volatility over the past two months as the world copes with COVID-19 and investors look to reduce risk. The MBS market managed to stabilize amid help from the US Federal Reserve, which purchased these and other securities in a broad support program.

How has the coronavirus shock changed medium-term fundamentals? And how does that change our long-term asset views?

There is a growing debate in financial circles over whether the US Federal Reserve should move to a negative interest rate policy in an effort to stimulate the economy during the coronavirus crisis. Even President Trump has said more than once in recent weeks that he favors negative interest rates and considers them a “gift.”

The coronavirus kills, everyone knows it. But this isn't the first deadly virus the world has seen, so what happened? Why did we react the way we did? One answer is that this is the first social media pandemic. News and narratives travel in real-time right into our hands.

Thus far in 2020 and throughout the COVID-19-induced sell-off and partial recovery, there has been a pronounced size and style bias within the US equity market in favor of growth over value and large-cap over small-cap.

Rising optimism in the economy is popping up everywhere, with shares of banks and energy companies and small firms soaring.

For investors searching for yield in volatile markets, corporate credit may be the answer.

Dr. William Reichenstein and William Meyer will answer advisors’ questions about how the coronavirus crisis has impacted retirement planning, specifically focusing on tax-efficient withdrawal strategies and Social Security claiming strategies. The points they will cover include the following:

• How at a high level has COVID-19 impacted retirement planning?
• How can advisors add value with retirement planning in the crisis-era?
• Why are tax-efficient withdrawal strategies a good way for advisors to show their “advisor alpha” or how they can add portfolio longevity?
• How will COVID-19 impact market returns and tax-efficient withdrawal strategies?
• How will COVID-19 impact future taxes and tax-efficient withdrawal strategies?
• Case examples illustrating the impact and value withdrawal strategies make for a client.
• How has this environment impacted Social Security planning? Should clients behave differently?
• What strategies do you recommend for “fixing” clients who claim early because of the coronavirus?
• How can advisors best help clients near retirement or in retirement?

To get a handle on the state of U.S. small caps after the pandemic-induced losses in early 2020, we ask: How did the U.S. small-cap group perform relative to other market-cap groups during the several years through 2019? How did they perform during the downturn...

Great investment opportunities are lonely. History shows us the crowd behaviors to avoid and the investment market circumstances to capitalize on. We believe we are at one of the great junctures, where the crowd thinks they unequivocally know the future.

You don’t control the spread of COVID-19 or the timeline for when an effective treatment or vaccine will be available. You can control your expenses.

With today's release of the March S&P/Case-Shiller Home Price Index, we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.47% month over month which is cut to 0.21% with inflation adjustment.

This morning's release of the April New Home Sales from the Census Bureau came in at 623K, up 0.6% month-over-month from a revised 619K in March.

The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for March. U.S. house prices were up 0.1 percent on a seasonally adjusted nominal basis from the previous month. Year-over-year the index is up 5.9% (nonseasonally adjusted). After adjusting for inflation and seasonality, the index is up 0.81% in March and up 5.03% year-over-year (seasonally adjusted).

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –16.74 in April from –4.97 in March. All four broad categories of indicators used to construct the index made negative contributions in April, and all four categories decreased from March. The index’s three-month moving average, CFNAI-MA3, decreased to –7.22 in April from –1.69 in March. Following a period of economic expansion, an increasing likelihood of a recession has historically been associated with a CFNAI-MA3 value below –0.70.

Students and their families are wondering whether it’s worth shelling out tens of thousands of dollars for an experience that might be largely online.

When the COVID-19 crisis shook markets in March, the Federal Reserve moved early and aggressively to help increase liquidity in financial markets.

• Leaders are an ‘open book’ when discussing future action
• Equity market will not ‘turn the page’ on volatility just yet
• A vaccine would alter the COVID-19 ‘narrative’

COVID-19 has supplied the catalyst for a secular change in the role of central banks. Providing governments with ammunition to fight the virus is now the overriding goal, and this means keeping bond yields pinned close to zero for the foreseeable future.

Down equity markets plus low interest rates can make GRATs a tax saver for high-net-worth clients.

This is the perfect opportunity to deepen your client relationships by talking about what matters most to them and integrating their financial decisions with their spiritual life.

Against this backdrop of anything-goes spending, the idea of having a national currency backed by a real asset like gold seems less and less crazy to some. Doing so, it’s believed, would force lawmakers to practice fiscal discipline, reign in inflation and normalize international trade.

We finished the Virtual Strategic Investment Conference yesterday. I shared some highlights in last week’s letter, will tell you more today.

The pandemic is putting universities and their graduates to the test.

On April 9, Memphis-based Southeastern Asset Management announced that it was re-opening its Longleaf Partners Small-Cap Fund (LLSCX). It had closed the fund to new investors in August 1997. I interviewed two of the fund’s managers, Staley Cates and Ross Glotzbach.

As fixed-income markets have started to recover following the massive selloff and liquidity crunch in March, credit risk-transfer securities (CRTs)―agency mortgage securities not guaranteed by Fannie Mae and Freddie Mac―have been slower to do so. Investors are wondering: Where do CRTs go from here?

The airline sector may be experiencing some turbulence now with COVID-19, but the industry has flown through storms before. After all, airlines stocks managed recoveries after the 9/11 attacks, the SARS outbreak in 2003 and the global financial crisis in 2008.

With markets starting to make a comeback, our Multi-Asset Solutions CIO Ed Perks looks ahead to second half of the year, including the implications of the US economy opening up, the ongoing impact of the massive monetary and fiscal response, and the risk for a wave of downgrades and defaults.

China's economy looks to be well on its way to recovering from the coronavirus-imposed lockdown with consumer spending, manufacturing and investment bouncing back. But can we trust China's macro numbers?

Some financial advisors report that they’re hearing from older clients who’ve grown accustomed to staying home and are worried about commuting and returning to crowded workspaces.

The blow against globalization will cut global growth and be particularly damaging for developing countries, especially those reliant on exports, she said.

Small-cap stocks were hit harder than large-caps in the coronavirus sell-off. But given the extreme market dislocations, select smaller companies with innovative advantages could offer investors a surprising source of diversification for the uncertain times ahead.

Potential for a large payoff on value strategies may exist soon, if history is any guide.

The latest Conference Board Leading Economic Index (LEI) for April was down 4.4% from the March figure of 103.4.

This morning's release of the April Existing-Home Sales showed that sales fell to a seasonally adjusted annual rate of 4.33 million units from the previous month's 5.27 million. The Investing.com consensus was for 4.30 million. The latest number represents a 17.8% decrease from the previous month and a 17.2% increase year-over-year.

The proposed sum for the recovery fund proposed by French President Emmanuel Macron and German Chancellor Angela Merkel is small change in an era when politicians and central bankers conjure up trillions almost daily. But, if adopted, the proposal might be remembered as the moment when Europe became a genuine political federation.

Is it possible the Fed over-reacted to a natural disaster? There are two different types of “recessionary” events that occur throughout history. The first is a “business cycle” recession, which happens with some regularity as excesses build up in the economy. These cycles generally take 12-18 months to complete as those excesses are reversed.

The latest Manufacturing Index came in at -43.1, up 13.5 from last month's -56.6. The 3-month moving average came in at -37.5, down from -10.9 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 49.7, up from the previous month's 43.0.

The bank expects to keep its offices half full at the most for the “foreseeable future.”

Whiplashed investors have been thankful for a dose of calm, but signs are emerging the lull may not last.

We're seeing that there are meaningful differences between the last downturn and this one.

Major economies are easing restrictions to reboot economic activity. Unfortunately, they are faced with a difficult tradeoff between lives and livelihoods.

For years I have been warning that during the age of permanent stimulus (which began in earnest with the Federal Reserve’s reaction to the dotcom crash of 2000), each successive economic contraction would have to be met with ever larger, increasingly ineffective, doses of monetary and fiscal stimulus to keep the economy from spiraling into depression.

Rick Rieder, Russ Brownback and Trevor Slaven contend that even as markets were rocked by uncertainty as the coronavirus lockdowns began, the seeds of stability were sown in the massive fiscal and monetary policy response. The key is to know how to manage through this period for the long haul.

A brief monthly update on what's happening in the municipal bond market....

Economic fallout from the pandemic is devastating US retail. But companies that were already adapting well to seismic changes in the industry should prosper over time.

Capital markets are in disarray in reaction to the coronavirus crisis and the necessity of pausing the global economy. The CBOE Volatility Index (the VIX) rose to over 80 in March and thankfully has settled down to a level of about 35, which is still over twice its trailing five-year average of about 15.

Neil Howe foresaw a global crisis that would upend society. He didn’t know it would be a pandemic, but, throughout his career, he has been predicting a “fourth turning” – an event that would reshape societal norms and usher in a new generation of leaders.

Wealth managers have reported a better-than-expected start to the year as wealthy clients sought to limit damage or make opportunistic bets when the coronavirus wreaked havoc on markets.

JPMorgan Chase’s CEO says the pandemic should serve as a call to action for business and government to think, act and invest for the common good and confront the structural obstacles that have inhibited inclusive economic growth for years.

Weighty issues need to be considered before making expensive college commitments that could easily be disrupted in the coming months.

The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 37 is up 7 from last month's 30 after its largest monthly decline last month.

A compassionate society has both economic reason and ethical responsibility to provide a social safety net to its most vulnerable members. It is an act of both economic insanity and ethical corruption to provide a financial safety net to its most reckless speculators.

On a day that started with good news on an experimental COVID-19 vaccine, with the stock market showing strong early gains, today’s report is more visual and less wordy than normal. Since I know not every reader of these publications follows me on Twitter—where I’m constantly posting charts, tables and data that I find compelling...

In his May 13 webcast on the economic outlook, Federal Reserve Chairman Jerome Powell struck a cautious tone. That mood was reinforced by the economic data reports that followed. The economic outlook depends on the virus and efforts to contain it. There’s hope that monetary and fiscal support will carry us through and the virus will be checked.

Ben Powell writes that China may change policy at the delayed National People’s Congress in three key areas: the GDP target, household registration reform, and – crucially for markets – fiscal stimulus.

The Fed continues to dismiss the idea of negative US rates but the market keeps pricing them in. We don’t expect negative rates: in our view, the market is using them as a proxy for Fed measures that may be needed but aren’t yet identified.

As European economies slowly start to come out of coronavirus lockdowns, it could be some time before growth returns to pre-crisis levels, according to David Zahn, our Head of European Fixed Income. He says the crisis has been another test for the European Union...

The COVID-19 crisis is likely to accelerate many underlying, secular disruptive forces already affecting economies and financial markets. This may only increase the difference between those companies, sectors, and countries that are being disrupted, and those that are acting more like disruptors. Distinguishing between the two is becoming crucial.

I am in Gloucester, MA at the home of the noted economist Dr. Horace “Woody” Brock. I visited Woody here two months ago and recorded a podcast as the coronavirus crisis was unfolding. Today, I am going to ask Woody some follow-up questions.