Stocks Continue Advancing But it is Prudent to Remain Cautious

Posted in , By David M. Smith

This week the stock markets continued to rally based on the belief new virus cases were peaking and there is potentially more government stimulus on the way.  Reuters  Evidence is starting to mount that there is a decrease in new hospitalizations and admittances to ICU for some of the earliest and hardest-hit places in the U.S.  Axios  Also, many are viewing Italy as a precursor to the U.S. and virus deaths in Italy are now at a 25-day low.  Reuters

There is still plenty of bad news including rising U.S. death rates, skyrocketing unemployment claims, and the British Prime Minister requiring hospitalization from the virus.  BBC  Despite that bad news, the markets were starting to look past the virus and toward the recovery.  But we would caution that many bear markets have strong stock rallies within them, only to give up the gains shortly thereafter.  Bloomberg  The good news is welcomed, but we still have a long way to go before there is an all-clear signal that we are firmly back on the road to recovery and investors should remain braced for continued market volatility.

  • Can the U.S. Afford the $2T Stimulus?  Many investors are asking how the U.S. will pay for the huge stimulus package.  But interest rates are low on debt issued by the U.S. Treasury with strong demand from investors and quantitative easing.  There is a good chance the annual costs on interest for borrowing for the trillion-dollar bill could be $30B or less.  A paltry sum for a $20T economy and equivalent to about 2-3 days of normal annual federal spending.  NYT
  • Drivers May Receive Auto Insurance Refunds:  Due to the reduction in driving miles and fewer accident claims, many auto insurers could post great first-quarter results.  Also great – they may return some premiums to insurers!  US News
  • Aggressive Social Distancing May Lead to a Stronger Recovery:  Researching the 1918 Spanish flu pandemic may help us understand how regions will react after coronavirus has passed.  The analysis shows that cities that aggressively enacted social distancing emerged stronger than those that didn't.  NYT
  • Time for a Roth Conversion?  Due to the stock market decline, historically low taxes, plus many Americans potentially making less income this year, it may be the perfect time to do a Roth conversion.  We will be examining client portfolios for candidates for converting but you can also reach out to your advisor to discuss.  US News 
  • Your quick hit entertainment and activity ideas while we are all practicing shut-ins:
     
    1. Watch a happy documentary available on Netflix: NYT
    2. Take a virtual tour of a world-class museum: Travel & Leisure
    3. Send a singing telegram to a loved one or watch a live video performance: Seacoast Rep
    4. Why not write an actual letter to a friend? Yes, with a pen…  Thrive Global
    5. Use someone other than Amazon for shopping and shipping, how about local? WSJ
  • Stimulus Package in a Chart:  If you want a visual of where the $2T stimulus bill is going, click on the link for a chart.  Visual Capitalist
  • Travel Deals or Travel Headaches?  Some travelers are opportunistically scooping up deals for late summer or fall travel.  But will the deals turn out to be a headache if they have to cancel or reschedule?  Though I'd love to pick up an affordable trip to Europe right now, it seems like a gamble.  I'm more inclined at the moment to vicariously travel through others.  WSJ  NYT
  • Some Very Important Essential Worker Declarations:  For those celebrating Easter this weekend, you'll be happy to know that the governor of NH has declared the Easter Bunny as an essential worker.  Not to be left out, the Tooth Fairy also has an exemption!  WMUR
  • Quote for the Week:  "True happiness is to enjoy the present, without anxious dependence upon the future, not to amuse ourselves with either hopes or fears but to rest satisfied with what we have, which is sufficient, for he that is so wants nothing."  Seneca

Be well, stay safe, and thank you for reading.  Please send along any topic ideas and forward this to anyone who would benefit from the information.

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About the Author David M. Smith

David is a Senior Financial Advisor and the firm’s Co-Chief Investment Officer. He has more than 20 years’ experience in the financial services industry and holds the highly respected Certified Investment Management Analyst™ and Certified Financial Planner™ designations; he is a Co-Managing Member of the firm.
Disclaimer and Disclosures: Past performance is no guarantee of future results. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Our opinions are subject to change without notice as market and economic conditions shift. Robinson Smith Wealth Advisors, LLC is a Registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply any certain level of skill or training. Personalized financial planning and individual investment advice are not offered through this website. The general financial and investment information furnished through this website or associated with this website by links is believed to be accurate, however, Robinson Smith Wealth Advisors makes no guarantee to this fact and does not have control over the accuracy of websites found through links within.