What a week. As if a pandemic, extraordinarily bad unemployment numbers, and significant recession weren’t enough for the markets to process, a percolating crisis in oil prices boiled over on Monday. The shutdown has caused international demand for oil to plummet, as flying and driving have been severely curtailed. Adding to the chaos, Russia and Saudi Arabia chose this moment in time to fight each other for market share by boosting production. This drove prices down, affecting U.S. producers caught in the crossfire. As U.S. futures came due Monday, with virtually no additional storage capacity available, some speculators were paying people to take barrels off their hands – temporarily causing the price to go negative!
New first-time claims for unemployment benefits were at 4.4 million, bringing the total to more than 26 million since the shutdown began. While the number of first-time claims was lower than last week, the fact that the total figure represents roughly 17% of the U.S. workforce is obviously causing concern. The hope is that a sensible reopening of the economy, paired with a decline in new coronavirus cases, will drive demand higher – quickly pulling a significant number of individuals from the unemployment rolls.
Fresh legislation to increase the government’s fiscal response passed the Congress and was signed into law by President Trump. This new bill provides nearly $500 billion of additional relief for small businesses and hospitals, as well as increased nationwide virus testing capabilities. More than $2.5 trillion dollars have now been earmarked by the government in response to the pandemic.
Next week, we will get our first glance at the first quarter U.S. GDP number, which will shed additional light on the scope of the shutdown’s economic effects. Stock markets fell for the week, after processing all of the economic, fiscal and public health news: The S&P 500 Index lost 1.3% and the Dow Jones Industrial Average dropped 1.9%. Since reaching recent lows on March 23, the S&P has gained 29.4% while the Dow has risen 30.5%.
While no industry has been immune from the shutdown, some have been impacted more than others. Travel and leisure, transportation, energy, home builders and specialty retail are examples of sectors hit especially hard as demand for their products have plunged and their near-term business prospects remain uncertain. While we continue to analyze these sectors for potential opportunities during the coming recovery, we are currently following earning updates for insight on corporate expectations and reviewing how this pandemic will impact overseas companies. We remain rooted in our core philosophies of asset allocation, global diversification, and cost sensitivity but continually examine domestic and international sectors, as well as the state of credit markets.
As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your portfolio.