Market Report for the Month of May
With great uncertainty comes tremendous opportunity. For those who have strong stomachs and willing to weather volatility in the markets, there are still plenty of chances to turn the market to your advantage. Maybe more so now than ever. In this post, we will go over the latest trends in the overall market, as well as some possible windows of opportunity.
Stocks are on the rebound
After much of the country strictly adhered to their state stay-at-home orders, news broke that the general public was successfully flattening the curve and slowing the growth of the Coronavirus Pandemic. The stock market responded to this by very nearly erasing all of the losses accumulated in March. Most companies reporting lackluster earnings in Q1, as can be expected, which created a modest headwind in the stocks market. Those numbers, combined with record levels of unemployment has added to the steep hill ahead of us.
More certainty for the Paycheck Protection Program
After a rocky rollout, the Small Business Administration (SBA) has issued further guidance regarding the Paycheck Protection Program (PPP). On Wednesday, they issued a new interim rule allowing lenders to expand their loans to partnerships and seasonal employers. They also announced that all loan recipients of amounts less than $2 million would be given a safe harbor. Basically giving a large swath of borrowers the peace of mind that in the eyes of the SBA and the treasury, their applications were made in a good faith that their loans were a necessity. The treasury released a new set of FAQ’s which can be found here.
News from the Federal Reserve
Federal Reserve Chairman Jerome Powell left the door open for more fiscal engineering from the Fed. However, he did say that much of this action will have to take place on the policy side of things from congress, rather than from the Fed. They have already cut their benchmark interest rates (the rates that banks offer to each other on overnight loans) to near zero. With many people prophesizing a future with negative interest rates mirroring those of countries like Japan, Powell said, “The committee’s view on negative rates really has not changed. This is not something that we’re looking at.”
Although as a country we are experiencing record unemployment and lack of economic activity due to an unprecedented world event, our economy has always shown a tremendous amount of resiliency. As many states are beginning to relax their stay-at-home orders, all signs are pointing to consumer’s being very anxious to return to old spending habits and prosperity. These last few months have cut sharply into the world economy, but there is light on the horizon and there is a strong possibility of a spirited and powerful recovery.