While we are encouraged by the longer-term prospects for economic and corporate earnings growth that may result from stimulus, lower energy prices, and lower interest rates, we believe that investors may not be fully discounting the economic and psychological impact that the COVID-19 virus may ultimately cause. It is difficult to predict with accuracy when the virus will subside, when a vaccine will be widely available, or if a new wave of infections will materialize later this year.
It’s also possible that households, many of which finally regained their confidence to spend just within the last few years following the global financial crisis of 2008, will quickly reduce their spending and delay large purchases and significant life events as their confidence in their future economic prospects and paycheck stability has been damaged. Given the sharp rebound in risk assets in April, particularly US equities, we remain cautious. We may experience a sharp economic recovery later this year as markets are implying today, but we do not believe that broad market prices for equity and credit are appropriately reflecting the possibility that the path to recovery may be quite volatile.
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Past performance may not be representative of future results. All investments are subject to loss. Forecasts regarding the market or economy are subject to a wide range of possible outcomes. The views presented in this market update may prove to be inaccurate for a variety of factors. These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.