March 20 2020 Market Update

Coming Together: Local and Government Policy

Jeff Fishman here. As California heads into its first weekend of sheltering-in-place as a state, I’ve been thinking a lot about the lessons I learned from the life of my grandfather. He always told me that if you live long enough, you will see virtually everything.

He also liked to say, “Don’t let your highs get you too high or your lows get you too low.” None of us have ever experienced something like this before, and of course we are all worried for our loved ones and our communities.

It’s easy to despair at the news and the rapid changes to our lives, but please join all of us at JSF in coming together to endure the challenges we’re facing so that we can be poised to thrive in the years ahead. There is a light at the end of this tunnel.

In the meantime, we are continuing to serve you in every way we can, both one-on-one and providing news and information as the situation evolves.

Our staff is already successfully working remotely from home thanks to the benefits of modern technology, and you’ve probably already talked to your advisor the old-fashioned way – by phone call. Don’t hesitate to reach out to us via the main line at (323) 866-0833 or via email.

Turning now to the news: here’s what you need to know.

Key updates for California

California has just announced a “shelter-in-place” order for the entire state in an attempt to curb the spread of COVID-19. Essentially, Californians are being asked to stay at home except to obtain needed items like groceries and medicine, and to otherwise limit social interaction.^[1]

A key reason behind the order: without action, the governor’s office estimates that 56 percent of Californians could be affected by the virus, with a 20 percent hospitalization rate – putting the state almost 20,000 hospital beds short at current capacity levels.

Please see below for resources related to the order and its impact on small businesses.

Economic stimulus programs

The economic impact of COVID-19 on the American economy is already taking hold: jobless claims rose to 281,000 last week from 211,000 the week before.^[2]

As of this writing, on Thursday March 19, Senate Republicans released proposed legislation to provide $1 trillion worth of economic stimulus in the wake of the coronavirus pandemic.^[3] At the center of the plan is some $500 billion in direct assistance sent to American households, with potential follow-up payments should the crisis persist.

Of course, the proposal still needs to pass Congress. Key areas of potential disagreement by Democratic policymakers lie in the provision of corporate relief and the breadth of available paid-leave benefits for workers.^[4]

As of Friday morning, 31 central banks have cut interest rates – an unprecedented number – in response to the crisis. Many, including the Federal Reserve, have opened up stabilizing activities like buying bonds, intervening in currency markets, and setting up lending programs.^[5] The Federal Reserve has stepped in to preemptively shore up money market funds in the wake of high redemptions.^[6]

The way we see it, some of the key lessons of the financial crisis are on display in the Fed’s response. Namely, act early and act often. While markets didn’t take the Fed’s weekend rate cut well on Monday, we believe it shows that the institution is willing to do whatever it takes to get ahead of the economic impact of COVID-19.

Where we go from here

We expect short-term economic pain and human costs – not only for those affected, but by the stress and concern that many of us are shouldering. That said, we think it’s important to look ahead. After essentially 6 weeks of shutdown, factories and stores in China began to reopen for business. It hasn’t been entirely smooth sailing, but life is returning to normal.^[7] 

The race for a vaccine is also on – and we can’t think of a time in world history when so much scientific technology was available in the fight against a specific disease.

This could be a significant shock for our lives and the economy, but it is not a permanent one. It is our responsibility and our mission to help you prepare for what comes after, and to remain poised for the opportunities that can arise.

JSF Financial