May 06, 2020

The HCM BuyLine® is now into the fourth week of being positive. The S&P 500 looks like it is trying to break out as news comes out that multiple states are re-opening. The 20-Year Treasury Bond is starting to fade, as investors are selling the bonds and moving back into equites. Earnings and bad economic news are clearly to be expected, no surprise there, but China is getting back to normal at a fast pace. Goldman Sachs economists show that China’s April economic activity is back to 80% of the 2019 levels pre-COVID. 

TLT 20 Year Treasury Bond

The Goldman Sachs economics team posted a chart highlighting something they have been saying for some time, that the Federal credit for unemployment is going to lead to an actual rise in consumer disposable income (DPI) in Q2 and Q3 2020. In other words, the extraordinary actions of the White House are indeed acting as a major buffer to the consumer buying power in the next 6 months. 

S&P 500

Coronavirus Update:

Some new milestones were achieved on Monday. California, the largest state in the US, announced plans to open the economy (Stage 2) this Friday, making 24 states with phased opening and 54% of GDP. The state had already eased rules around elective surgeries, and this move is allowing many 'low risk' businesses to resume operations. California is an economic giant, representing 15% of US GDP. Furthermore, the state of New York saw daily cases CRASH to 2,538, capping 5 days of declining cases and bringing total cases down 76% below peak. New York has made a lot of progress in the past week and the recent data, including hospitalizations, decisively shows sustained slowing of COVID-19. NJ also saw cases fall 50% on Monday (1,525 from 3,027). Now over half of the US has announced plans to re-open the economy, with many starting this week. This increase in 'open economies' coupled with Americans showing less fear is a step towards resuming economic growth.

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