When the virus was beginning to go through the population, most people believed there was short term pain needed for long term gain. The short term pain was to isolate people to ensure the virus was contained and then things would go back to normal as quick as possible. The solution was for the government to shutdown most of the economy, pay a bridge for those affected and then they would all resume. It was a great theory, but there was a flaw. Much of the economy and the design of cities are for people to meet in large groups or events. For example the train station has a market attached to it or very nearby which brings people together to meet and eat. Under social distancing, governments do not want people to meet as much. What do you do?
In an article by Lucia Mutikani of Reuters, the idea that everything would go back to normal or a V shaped recovery is looking like the dodo bird (it is extinct). Economists believe it will take a while for activity to rebound, even as businesses in many states are reopening.
Robert Frick, a corporate economist at Navy Federal Credit Union in Vienna, Virginia said the predicted second wave of layoffs may have started. This is more layoffs building on the initial layoffs as middle managers and those in support industries lose their job.
The first layoffs were overwhelming women and those on the lower end of the pay scale as they held the bulk of jobs in food services, retailing, and hospitality. Those who could work from home have tended to be higher paying jobs. When companies open up for business again, will they have as many employees or will they hire less to start?
Linking to dividend paying stocks, everyone has a theory or idea of what will or could happen and it is theory until it does happen. Fortunately for the market, some of those theories are correct and some of them are not, trading gives us clues which is correct for the time period. The only constant is cash flow is king, most of the time balance is the key but if either the bond market or the stock market gets ahead of itself issuing more bonds or stock is a good thing, until it is not. There is never perfect information but try not to be a cheerleader.
There are more questions than answers, till the next time – to raising questions.