Commentary 4/27/2020
The Markets April 27, 2020
We live in interesting times.
There is discussion about whether the saying, “May you live in interesting times,” is a blessing or a curse. At this point in 2020, we all understand why.
Last week, the world watched in consternation as the price of oil, specifically West Texas Intermediate crude oil, dropped into negative territory. The price moved below zero because a purchase date coincided with a lack of storage space. As a result, the owners of the oil had to pay to have it taken off their hands, reported Ben Levisohn of Barron’s.
Oil prices recovered on Wednesday. Global oil producers have promised to reduce output, which would realign supply and demand, but it has yet to happen, reported Evie Liu of Barron’s. The delay may reflect a hope that coronavirus restrictions will ease, economies will begin to reopen, and demand for oil will increase.
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Investors were understandably unsettled by oil prices, and U.S. stocks lost value early in the week. As oil stabilized, U.S. stocks pushed higher. The rebound in stocks stalled on news that trials for a potential COVID-19 treatment had produced disappointing results.
Thursday’s unemployment data showed 4.4 million people filed for unemployment benefits the previous week. That brought the number of unemployed Americans to more than 26 million, according to Jeffry Bartash of MarketWatch.
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Earnings, which reflect companies’ profits, remained less than robust, as expected. “The blended (combines actual results for companies that have reported and estimated results for companies that have yet to report) earnings decline for the first quarter is -15.8 percent…” reported John Butters of FactSet.
The energy sector finished the week in positive territory.
STIMULUS CHECKS ARE ARRIVING. The Internal Revenue Service (IRS) has distributed $157.9 billion through 88 million stimulus payments, according to Andrew Keshner of MarketWatch.
If you have recently lost a job, or you’re having difficulty paying bills, your check may already be spent. However, if you’re still working, or remain financially comfortable, think carefully about how you want to spend your checks. The money could be used to improve your long-term financial outlook or provide support to people in need. For instance, you could:
• Contribute to an emergency fund. It’s a sound idea to have savings equal to three to six months of expenses in a rainy-day fund in case something unexpected happens, such as a coronavirus quarantine.
In 2019, the Board of Governors of the Federal Reserve reported just 61 percent of adults had enough savings set aside to cover a $400 unexpected expense. The report stated, “During 2018, one-fifth of adults had major, unexpected medical bills to pay, with the median expense between $1,000 and $4,999. Among those with medical expenses, 4 in 10 have unpaid debt from those bills.”
• Pay off high-interest rate debt. If your income is secure, using your check to reduce high interest rate debt may be a good choice.
In early April, the average interest rate assessed on credit cards accounts with unpaid balances was 16.61 percent. Reducing your balance, could significantly reduce the amount of interest you pay. In addition, if something unexpected happens, having a higher level of available credit could be beneficial.
• Donate the amount. If you are confident you will not need the money, consider making a donation. A donation can take many forms. You could help a loved one pay bills or provide support to a church or charity.
“…many charities and nonprofits are still struggling. Donations to some churches have plummeted, and many charities have had to cancel crucial fundraising events such as galas, bike races, and walkathons,” reported the Associated Press.
What are you planning to do with your stimulus check?
Weekly Focus – Think About It
“Do you think you remember a movie in which a knight gallops toward a castle just as its drawbridge is going up, and his white horse jumps the moat in one glorious airborne leap?
…we’re that rider. Chasing us is the dreaded coronavirus. We’re in midair, hoping we make it to the other side, where life will have returned to what we think of as normal. So, what should we do while we’re up there, between now and then? Think of all the things you hope will still be there in that castle of the future when we get across. Then do what you can, now, to ensure the future existence of those things.”
–Margaret Atwood, Time Magazine, April 16, 2020
* These views are those of Carson Coaching, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm.
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Sources:
https://en.wikipedia.org/wiki/May_you_live_in_interesting_times
https://www.barrons.com/articles/in-a-stock-market-like-this-anything-could-cause-the-next-panic-heres-what-to-watch-51587776542?mod=hp_HERO (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-27-20_Barrons-In_a_Stock_Market_Like_This_Anything_Could_Cause_the_Next_Panic-Heres_What_to_Watch-Footnote_2.pdf)
https://www.barrons.com/articles/dow-jones-industrial-average-rose-as-oil-prices-came-back-51587591022?refsec=markets (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/04-27-20_Barrons-The_Dow_Rose_457_Points_Because_Oil_Prices_Came_Back-Footnote_3.pdf)
https://www.marketwatch.com/story/jobless-claims-jump-another-44-million-25-million-americans-have-lost-their-jobs-to-the-coronavirus-2020-04-23
https://www.investopedia.com/terms/e/earnings.asp
https://insight.factset.com/sp-500-earnings-season-update-april-24-2020
https://www.marketwatch.com/story/the-irs-has-already-paid-out-over-half-the-stimulus-check-money-heres-where-it-went-2020-04-24
https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm
https://www.federalreserve.gov/releases/g19/current/default.htm
https://apnews.com/0cca8af954b111ef460d823f7cd81a49
https://time.com/collection/finding-hope-coronavirus-pandemic/5820595/margaret-atwood-coronavirus-uncertainty/
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