The shift from traditional retail to online shopping has accelerated as physical stores in many states were forced to close temporarily as part of COVID-19 shutdowns. Brick-and-mortar retail may regain share when the economy reopens, though many habits learned during the outbreak may persist indefinitely.
Equities had their worst week in nearly two months, as cautious comments by Dr. Fauci and Fed Chair Powell shifted investor views. Monday shows the shifting nature of sentiment, with a rally on the heels of encouraging vaccine data.
We believe the coming recession will likely be well above the average post-war recession, but not consistent with the last true economic depression. We’re somewhere in between--expect this recession to be worse than those in the recent past, but not like the Great Depression.
Economic and financial commentary as of May 2020
The risk-on environment continues despite the uncertain outlook, with relative strength in growth names, small caps, consumer discretionary, technology and energy over the past month. Valuations have risen to the highest level of the expansion at 21x, showing that investors are betting on a smooth recovery in the economy.
Dividends and share buybacks were the two major factors in the strong performance of stocks over the last decade. The coronavirus outbreak and economic collapse put these drivers of return at risk for the near and long term.
