Recession is Official, Interest Rates Stay Low, Retail Better Than Expected
In today’s Steady Investor, we look at key questions investors are asking, and factors that we believe are currently impacting the market such as:
- We are officially in a recession, but how long will it last?
- What can we learn from unclear job data?
- The Fed is likely to keep interest rates low
- Major retailers are seeing better than expected sales
What We All Knew is Now Official: The U.S. Entered a Recession in February – Official data usually takes several months – or even years – to confirm an economic recession. But the swiftness and steepness of this economic contraction made confirmation this time around much easier. The National Bureau of Economic Research (NBER) announced this week that the U.S. economy officially entered a recession in February, which marked the end of the longest economic expansion on record (128 months). There are reasons to also believe that this economic recession could wind up being the shortest on record – initial jobless claims peaked in March and employers actually added 2.5 million jobs last month, blowing nearly every estimate out of the water. Because the economic contraction was so severe to the downside, the estimated 2.5 million jobs ended up being the most jobs added in a single month on record, dating back to 1948. The stock market appears – at least for now – to be confirming that the economic recession is over, though it remains to be seen how quickly the economy can reclaim lost jobs and return to pre-pandemic growth levels. On a global scale, the world has never before seen so many countries enter a recession at the same time, even when considering the Great Depression and Great Recession.1
See How You Can Navigate This Recession
It remains to be seen just how quickly the U.S. economy can recover from the current recession. In our view, this uncertainty can leave many investors, especially those nearing or in retirement, fearful of what’s to come. If you’re at or near retirement, this recession may require pivoting your retirement investing strategy.
The market turbulence and uncertainty are scary—but now is the time to take action and prepare yourself for the coming months. It’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, The Economy is in Recession: 5 Insights to Navigate Your Way Through It.2
If you have $500,000 or more to invest, get our free guide today. You’ll learn the most scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather this one. Don’t wait—get this guide today!
What the Unclear Jobs Data Teaches Us – Though the U.S. economy was said to have added 2.5 million jobs in May, the unemployment data is arguably fuzzy at best. The pandemic has created all sorts of challenges to accurately detailing the unemployment picture, with the U.S. Labor Department issuing “misclassification error” warnings for three months straight. At issue is how workers and non-workers are classifying themselves on Labor Department surveys. Many respondents are classifying themselves as “employed but absent from work,” which the Labor Department believes should deem them “unemployed.” The Census Bureau is also having difficulty gathering data, as in-person interviews have declined substantially and as fewer people respond to its Current Population Survey. 3 There are two takeaways we can garner from the unclear data in the labor markets. First, the errors in counting do not change the bigger picture: Americans without jobs remains at a historically high point, with tens of millions of Americans currently out of work. The second takeaway is the most important, in our view: when trying to ascertain a complete picture of the U.S. economy, one should not rely on a single data point, such as the unemployment figures. Myriad data points are needed to gain meaningful macroeconomic insights.
The Fed Likely to Keep Pressure on Interest Rates – Federal Reserve Chairman, Jerome Powell, made some comments on Wednesday that indicated the Fed’s medium-term outlook on interest rates. The takeaway: interest rates are likely to remain low for years. Chairman Powell said the central bank has no plans to raise interest rates through 2022, and that they will continue to purchase Treasury and mortgage securities at a consistent pace for the foreseeable future, putting downward pressure on the long end of the interest rate curve. The Fed’s accommodative approach is good news for businesses and mortgage borrowers, but bad news for savers and banks – assuming the yield curve remains flat.
Some Major Retailers See Better-Than-Expected Sales Figures – Small signs of life are starting to emerge in the Consumer Discretionary sector, as U.S. consumers step back out into the economy to shop. Two anecdotal pieces of data this week came from Macy’s and Kohl’s, two popular big box stores. Macy’s said sales at reopened stores are down 50% as compared to before the pandemic, which is actually far better than the estimated -85% decline. Kohl’s said this week that sales were down 25%, which again is better than expectations. Macy’s expects to have 400 locations reopened this week, and Kohl’s has already reopened most stores across the country. 5 Consumer confidence is rising.
How Can You Navigate the Current Recession? There are many unknowns and fears surrounding the current recession and pandemic. While the market turbulence and uncertainty are scary, now is not the time to sit back but instead to take action and prepare yourself for the coming months. It’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide – The Economy is in Recession: 5 Insights to Navigate Your Way Through It.2
If you have $500,000 or more to invest, get our free guide today. You’ll learn the most scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather this one. Don’t wait—get this guide today.
2 Zacks Investment Management reserves the right to amend the terms or rescind the free The Economy is in Recession: 5 Insights to Navigate Your Way Through It offer at any time and for any reason at its discretion.
4 The Wall Street Journal, June 10, 2020. https://www.wsj.com/articles/fed-debates-how-to-set-policy-for-the-post-pandemic-economy-11591781402?mod=hp_lead_pos1
5 The Wall Street Journal, June 9, 2020. https://www.wsj.com/articles/shoppers-surprise-retailers-by-returning-to-stores-11591733058
6 Zacks Investment Management reserves the right to amend the terms or rescind the free The Economy is in Recession: 5 Insights to Navigate Your Way Through It offer at any time and for any reason at its discretion.
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