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Mosaic Weekly Article 5/16/2020

May 16, 2020

We are finally seeing some consistent late spring weather here in Maryland and it has been nice to enjoy our outdoor freedom. Hopefully you have been able to enjoy some fresh air this week as well. It’s hard to believe we are only a week away from the kickoff to summer and the Memorial Day holiday. This will certainly be a memorable start to the summer of 2020. Our transition to a more normal operating environment went very well this week and it’s been a pleasure to be able to game plan, in person, with our Mosaic team in a responsible and safe manner!

The action in our markets this week showed a bit more volatility than we have seen lately. While the Monday to Friday’s closing numbers might not show it (Monday DJIA close 24,219 to Fridays DJIA close of 23,685), we did briefly trade below the 23,000 level mid-week. As we have been expecting, the economic headlines are beginning to show the extent of the overall slowdown in activity. April saw a record retail sales plunge of (16.4%), not unexpected, but certainly noteworthy. Federal Reserve Chairman Powel spoke mid-week to reassure the public that the Federal Reserve stands ready to continue to support the broader markets and economic environment as needed. House Democrats have also begun floating another Coronavirus stimulus bill (the HEROES Act), while the White House indicated it would potentially support another round of stimulus checks. Many of our clients have been asking us the serious questions of how can our government continue to “print” money and what will this do to our debt levels in the future?

We all know that the U.S. is currently sitting at the highest debt levels this country has ever seen. With round after round of stimulus happening now, this deficit amount is only growing. If overdone, expansive monetary policy can create inflation. Typically, as inflation becomes problematic, the Federal Reserve will raise interest rates to slow down the flow of money. Inflation has been our friend of the last several years, but as we are seeing now, the prospects of increases in the prices of goods we consume, and dollars we borrow will eventually become a focus. The investing world is holding out hope that as states continue to reopen, more normal spending resumes, coupled with a recovering job market that the actions taken today will shorten the “recovery” time needed. It is simply too early to tell how this will all unfold. If we do see a second round of Covid-19 related illnesses in the fall or winter as some are predicting, the lasting impact will be felt for a long-time to come. In my own opinion, I believe that our financial markets and those in the investing world are betting that a proven vaccine will be here and available sooner than later. We are watching closely to see what the Covid-19 case numbers look like as states re-open their doors. If things remain “muted” and contained, the short-term memory we tend to have as Americans will prevail.

Stay safe and keep the faith!

Your local Towson Financial Advisors