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And where do we go from here, which is the way that’s clear?

| April 28, 2020

The song from David Essex poses a good question. More importantly, is there a clear way?

As usual, I will show you some charts to get a perspective on what is going on. If you now have that song stuck in your head, mission accomplished…(young Andrew says he doesn’t know the artist nor the song!)

Below is the S&P 500 chart and you can see that we are at an interesting point in the markets. With about 50% of the initial market drop now recovered, do we see a V-shaped recovery and things go right back to normal, or is the market ahead of itself and has more work to be done?

Next is the chart of new unemployment and continuing claims. You can see a big spike a few weeks ago on the upper chart, with a decrease over the last couple weeks. Keep in mind that you cannot continue to see huge numbers of 6+ million new claims each and every week, so a decrease is to be expected. The bottom chart shows continuing claims, which are now up to 16 million unemployed. That is roughly about 10% of the working population at this point, and is likely to rise still over the next weeks and months. Just yesterday, Boeing’s new CEO, Dave Calhoun, talked about layoffs (voluntary and involuntary) in the order of thousands. Those are still to come. The questions become, how many can go back to work when the restrictions are lifted…and when will those restrictions be lifted? We shall see (we see that golf course marshals will be in high demand locally come May 5th).


So why is the market going up while so many are unemployed, and we are in a recession (or worse)? We have shown this before but found a new pretty version with color to show you why, courtesy of our friends at Guggenheim Investments. The Federal Reserve has so far deployed $2.5 trillion to pump up the equity markets, save the bond markets, and keep ‘zombie’ companies from playing out their natural life cycle. There is also talk about the FED buying stocks at some point down the road, on top of their already pledged commitment to buy high-yield (aka, “junk”) bonds. If you read some things I do, some argue they are already buying stocks through SPV (Special Purpose Vehicles). No way to prove that since the fox is guarding the hen house. Add to that the US Government has spend $4+ trillion in stimulus bills and likely more to come. Will it be enough? Not sure, but don’t think for a second that they’ll stop trying with election looming so near.

This of course is only the US. The world central banks are on pace to buy $17 trillion worth of financial assets, based on how much was spent in March alone. Again, the big question is can we get off the hamster wheel, or do we continue to print more money? It’s going to be a heck of a hangover at some point (oops, did I give the ending away?).


I have mentioned this many times before, but the more things change, the more they stay the same. The very policies that politicians put forward to help those struggling to get ahead are the very same policies that have hurt those same people. See the chart below how this has worked for the bottom 50% of household net worth. I have marked presidential terms to show how this has evolved over the last five presidents. One could argue that through 2000, all groups were going up together. Since then it’s been a different story. Can I just put one theory out there?  FED and Government intervention in the markets may not have been good, and keeping interest rates too low for too long likely didn’t help either…


Let’s hope we can start reopening our economy and do it in a safe way for everyone’s benefit. Our hope is for small businesses to be able to see a path forward, find a way to reopen profitably, and begin to permanently put people back to work. The road will be tough, and we encourage you to support those businesses as they rebuild. For now, stay healthy and stay safe. Wash your hands often or use hand sanitizer, and limit touching your face, and practice your social distancing. Just be grateful that it’s sunny as you stand in that socially-distanced line outside of Costco for two hours. Oh, and did we mention – the Mariners are still in 1st place at the end of April!