Investment Commentary May 2020Submitted by Canty Financial Management on April 27th, 2020
Over the last few months, the impact of the coronavirus has had a traumatic impact on our global economy. As a result governments throughout the world have implemented policies to combat an economic downturn. Even with the significant amount of monetary stimulus there will still be reverberating effects from the coronavirus on global GDP and economic growth. That being said, as the coronavirus begins to fade, and new infections begin to decrease we believe the economy will show a rebound over the coming years.
Moving forward the swift actions by central banks throughout the world have dampened the massive liquidity events impacting the bond markets over the last month. With unemployment reaching record-breaking levels, the United States and the global economy will have a temporary shock as the world tries to recover.
There will be a recession as a result of the Coronavirus economic impacts. However, we believe this recession will have a milder impact and smaller duration compared to an average recession. While this results in economic uncertainty, we believe the future of the US and global economy is bright.
Stock and Bond Markets
During times like these it is important to understand the differences between the economy and the stock market. The stock market is not a current snapshot of the current economy. The stock market is a “predictor” of future economic strength 12 to 18 months from now. For this reason, it is common to see disparities between the stock market and the current economic statistics like GDP, unemployment, and inflation.
We believe as a result of the turmoil in financial markets there are opportunities in US and international equities. Our recent rebalancing has focused on diversification, with added emphasis on the following sectors: Health care, Technology, Financials, Gold, and Investment Grade Bonds.
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