The U.S. has been dealing with COVID-19 for a little over 2 months now and cases continue to grow exponentially. A significant portion of the economy has shut down to slow its spread and yet the flattening of the curve remains elusive. Models show that the virus may not peak for another 2 to 3 weeks and deaths in the U.S. may climb as high as 240,000. If that is the case, it could be some time before the economy gets moving again and the economic damage can multiply in the meantime. We're already seeing historically bad employment data and it is likely to only get worse.  The market may be in for a bumpy ride in the weeks to come.  

This week the market turned lower once again as it grappled with the reality of a prolonged shutdown. There appears to be a lack of a catalyst to prevent a retest of the lows with the S&P 500 still roughly 10% higher than its March 23rd level. With the Fed going all-in, already significant levels of government stimulus in play, and even some work in shoring up in the energy space, the market seems like it has gotten as much good news as it can get until the virus starts to slow. Rather as economic data trickles in, surprises to the downside could be tough for the market to swallow with such uncertainty out there. 

However, we will take some good news where we can find it. President Trump appears to have convinced the Saudis and Russians to cut oil output. We've managed to string together a few big up days in a row for oil and energy companies have generally responded well. This is important considering a portion of the rise in joblessness has come from the oil patch. We're a long way from out of the woods, but progress is progress.

We continue to have a close eye on individual companies and in particular are watching what they are doing with their dividends. So far, there have been relatively few cuts and a number of those that have cut are referring to them as suspensions. It's possible that rather than an outright cut, companies like TJ Maxx and Ross Stores may only be temporarily hoarding cash to make it through the shutdown. This is likely a prudent move for these retailers even if it is at odds with their impressive dividend histories. They must be evaluated on a case by case basis.  

Preston May, CBE®
Research Analyst


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