It was impossible to predict how the economy and the market would respond to our current global health crisis, but we’re relieved to say it hasn’t had as bad of an impact as was widely anticipated. The second quarter of 2020 was one of the most unusual we’ve ever experienced. View our July 30th second quarter of 2020 economic update webinar recording, where we cut through the media hype and look at the economic numbers.
Many were concerned about the U.S. economic outlook, and things didn’t look good. When COVID struck in March, the markets crashed, unemployment skyrocketed, and consumers stopped spending money. But from the beginning, we always believed that no matter how bad it got, the economy would eventually recover. We’ve already begun seeing signs of that happening. Data also shows that consumer confidence is returning. When consumers feel more secure about their future, they spend money, which in turn helps the economy thrive. These trends are very encouraging because the sooner people return to their pre-COVID spending habits, the sooner the economy can recover.
In Q2, the U.S. economy officially entered a recession. GDP dropped 4.8%—a smaller number than financial experts were predicting (5 to 10%). Looking at the data, COVID-19 has not had as detrimental of an impact as what the media has portrayed. The market has started to bounce back, and it’s now flat for the year. Unemployment initial claims are leveling off, and we’re seeing unemployment overall begin to decrease. People are going back to work, and businesses are hiring again.
If you’re an investor, you may need to make some small tweaks to your portfolio to align with current spending habits. The things people are spending money on have changed. Consumers aren’t traveling or shopping at department stores; instead they’re buying technology, paper products, and investing in home improvement. We don’t recommend making large changes to your portfolio, but keep this in mind as you move forward and speak with your financial advisor about adapting to these new trends.
As consumers decreased their spending, the feds have increased theirs. We saw a lot of stimulus efforts this quarter: the CARES Act, the HEROES Act, and now the HEALS Act, which is expected to be passed soon. Some of the highlights within this proposed bill are a second stimulus check, a change in unemployment benefits, additional relief for business owners, a tax credit for businesses buying cleaning supplies, and aid for farmers.
As we look ahead, it’s impossible to predict what Q3 and Q4 will look like, but we don’t believe this year’s election season will have much impact on the economy. While there is much uncertainty in our world today, it’s not a time to panic. Instead, speak with your advisor about your financial plan, your investments, taxes, and estate plan so you can feel confident about your family’s future.
We provide economic update webinars each quarter to help you stay on top of financial and economic news. Would you like to be invited to future economic update webinars? Click here to join the mailing list.