“Our hope is that we see a “V” shaped recovery, where we have a couple of rough quarters of negative economic growth, but then the virus is no longer the threat it is now and people can get back to work and the economy comes back strong in the 4th quarter of 2020.”

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” – Winston Churchill

I put my razor on a “shelter in place” order yesterday. The governor closed up all non-essential personal service businesses until April 30th, so I’m unable to go to my favorite barbershop for a haircut. I decided that since the top of my head (yes, top of my head) is going to look shaggy by April 30th, the bottom of my head might as well be shaggy also. Dan and Jeff got on board, so now it’s a contest to see who looks the shaggiest by April 30th. I’m thinking that I will have more of the Santa Claus look and not the Harrison Ford look from his recent movie, Call of the Wild. I’m sure pictures will be forthcoming.

It appears that the stock market is nearing a bottom. I can give you a bunch of technical reasons, such as the volume of stocks hitting new lows has been very high; put/call ratios are at extremes; the yield relationship between stocks and bonds is more advantageous for stocks than at any other time in the past 65 years. And what does all that have to do with your investments? Mostly it means that we expect to see some stability coming back into the markets. Instead of days where the markets swing from being up 6% to ending down 8%, swings will be more normal where we see increases and decreases in ranges of .25% to 1%.

What it doesn’t mean is that the financial markets will come roaring back. Our economy is heading into, and is already in, a recession. Shutting down our society as we have, to stop the spread of COVID-19 is akin to the way a jet stops when landing on an aircraft carrier, it stops quickly and violently. Auto factories have stopped production, the travel and hospitality industry is almost non-existent, the energy industry is taking a hit, movies and entertainment aren’t healthy. I can only guess how many small businesses will shutter and never reopen. Housing and construction are going to take a big hit also.  I expect the number of unemployed to be huge in the coming weeks.

The length and depth of the recession is dependent on two factors. How long the virus sticks around and thus keeping our economy shut down, and whether Congress can pass some type of relief and stimulus package to aid the economy, especially small businesses and the unemployed. It appears that is going to happen, though Congress is extremely good at snatching defeat from the jaws of victory.

Our hope is that we see a “V” shaped recovery, where we have a couple of rough quarters of negative economic growth, but then the virus is no longer the threat it is now and people can get back to work and the economy comes back strong in the 4th quarter of 2020.

For now, we pray that you and yours stay healthy.

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” – Winston Churchill

Sincerely,

Mike Berry, CFP®
Linda Eden-Wallace, CFP®
Dan Funderburk, CFP®, CKA®
Jeff Funderburk, CFP®

These are the opinions of Mike Berry and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.

Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.

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