The New York Fed Staff Nowcast predicts a negative 14.3 percent (-14.3 percent) growth of real GDP for Q2 of 2020 and a positive 13.2 percent growth of real GDP for Q3 of 2020. Clearly, the Fed is expecting a rebound in the second half of 2020.
This forecast, presented in the July 17, 2020: New York Fed Staff Nowcast, attributes better than expected results for industrial production, capacity utilization and retail sales data categories, resulting in the upward revision.
For June 2020, the forecast for the Industrial Production Index was 2.48, but the actual figure was 5.41. As the Board of Governors of the Federal Reserve System defines it, this index gauges the real output in the U.S. economy’s industrial sector on a month-over-month basis as a percentage change.
For June 2020, its Capacity Utilization measure was 3.54, versus the original forecast of 1.84. Coming from the Board of Governors of the Federal Reserve System, this measures the percentage of resources consumed by businesses to create goods for all domestic production.
Also for June 2020, the U.S. Census Bureau reported a figure of 7.50, compared to the forecast of 2.17, for the month’s retail sales data, on a month-over-month basis as a percentage change. It looks at the sales from more than 12,000 retailers with paid workers, including food.
While there’s no definitive way to determine how each community, state or region will be affected, the Brookings Institution did an analysis that provided interesting insight into how and why certain areas may be more impacted economically than others. It looked at sectors more prone to interruption by COVID-19, resulting in less business, more closures and layoffs. It found that areas reliant on energy and in the southern part of the country were more likely to be negatively impacted.
Brookings found that by looking at 2019 employment figures for these industries, there are approximately 24.2 million jobs that are ripe to be disrupted. Looking to Moody’s, Mark Zandi found that the following five industries are most vulnerable: mining/oil and gas, transportation, employment services, travel arrangements, and leisure and hospitality.
Conversely, Brookings found that more mature manufacturing locales, agricultural centers and already economically challenged areas are less prone to negative impacts. However, it’s noteworthy that because of the proliferation of technology, which has seen in an uptick in computer sales and IT/cybersecurity due to increased remote working and learning, the potential for a rebound will be easier.
While the COVID-19 pandemic has the world in its grip, it’s noteworthy to discuss how past pandemics and infectious disease outbreaks have impacted markets. Over the past 40 years of global epidemics, according to FactSet and Charles Schwab, there have been mixed results when it comes to the impact of disease outbreaks on market performance, using the MSCI World Index as a reference.
In June of 1981 during the HIV/AIDS outbreak, the index fell 0.46 percent during the first month; falling 4.64 percent over the three months after the start of the outbreak; and down 3.25 percent six months after the initial outbreak.
As for the 2006 avian flu outbreak, the index dropped 0.18 percent one month after the start; then the index was up 2.77 percent three months after the outbreak; and up 10.05 percent six months after the outbreak.
Looking at these figures, it shows that more often than not, these types of events are short to medium term pullbacks, presenting investors with buying opportunities.
According to Zacks & Nasdaq, Q2 earnings’ projections for the S&P 500 is a negative 43.7 percent, with a drop of 11 percent in revenue. While Q2 is expected to be the worse, Q3 and Q4 are expected to experience smaller, but still noticeable drops in earnings due to the coronavirus. The transportation sector is expected to decline by 152.4 percent; autos is expected to decline by 224.2 percent; and energy is projected to drop by 138.4 percent, on a year-over-year basis.
While these were some serious declines for Q2, the one bright spot was technology. The technology sector declined by only 13.2 percent year-over-year, with a drop of 1.2 percent in revenues. However, it’s noteworthy that, much like technology has seen shallow losses along with the medical sector, it’s projected that in 2021 the technology sector will earn 8.8 percent more while the medical sector is expected to grow its earnings by 12.8 percent in 2021.
The coronavirus is unique in that there’s been mass stay-at-home orders and closures. However, based on past disease outbreaks, the economy and markets generally seem to find a way to balance themselves out.
It’s been nearly half a year since Americans first became widely aware of the coronavirus contagion within the United States. While for a brief month it looked as if we had the virus in hand, since then it has spread wildly out of control in many areas.
The impact of COVID-19 has caused many Americans to suffer hardships, one of which is struggling to make ends meet. But take heart; there are solutions. Here are a few areas in which creditors are working with people to alleviate some of the stress.
Away from the movies, robots are becoming a reality in everyday life.
Law Enforcement Suicide Data Collection Act (S 2746) – This bill authorizes the establishment of a new Law Enforcement Officers Suicide Data Collection Program to be administered by the FBI. The program will gather data related to suicides and attempted suicides of current and former officers, as well as the wrongful detainment of U.S. nationals abroad. The purpose of the Act is to help understand and prevent law enforcement suicides. The bill was introduced by Sen. Catherine Cortez Masto (D-NV) on Oct. 30, 2019. It was passed by the House and the Senate in May and was signed into law on June 16.
The HEROES Act, otherwise known as the Health and Economic Recovery Omnibus Emergency Solutions Act, can greatly improve the benefits for the earned income tax credit (EITC) for eligible workers who don’t have children. This legislation would also help wage earners in the business-to-consumer and leisure sectors of the economy impacted severely by the coronavirus pandemic.
The U.S. job market gained 2.5 million jobs during the month of May, dropping the unemployment rate to 13.3 percent, according to the U.S. Bureau of Labor Statistics. There’s likely been a lot of rehiring, with more to come as the economy continues reopening. However, until social distancing becomes a thing of the past, hiring effectively will take some pivoting during the pandemic.
As Johns Hopkins University of Medicine’s Coronavirus Resource Center revealed a recent increase of coronavirus cases in the Southern and Southwestern United States, the VIX ticked up. With fears of the outbreak curve not flattening, how will this impact markets?
Each year, millions of Americans make donations to charitable organizations and receive something in return – a tax break. However, the 2017 Tax Cuts and Jobs Act curbed this tax advantage because it reduced the number of people eligible to claim a charitable deduction by raising the standard deduction. For 2020, the standard deduction is $12,400 for individuals and $24,800 for married couples filing jointly. If your list of deductions is not greater than those amounts, there is no tax benefit to itemizing – which means you might not be able to claim your charitable donation.
With increased cyber threats, there is great awareness of malware that comes attached in files. Individuals and businesses invest in security solutions to protect against malware. In fact, there are often company policies regarding opening attachments on emails; yet there is an increase in a type of threat (though not new), known as the fileless malware.