During the past week, more economic data in the U.S. was released, showing the extraordinary impact of the COVID-19 pandemic. After a record number of 3.3 million unemployment claims for the preceding week, that amount was shattered with twice the number of claims last week. It is hard to put those 6.6 million unemployment filings into perspective given historical economic data. We do appear on a path to see unemployment rise by approximately 10% within a short number of months. I expect the gross domestic product for the first and second quarter to show very large declines, while deflation increases.
A major challenge to understanding the impact of the economic slowdown is how to interpret the data when no comparison exists. As a result, I am not sure how useful the data will be over the next few months for understanding where we are going in markets, as fundamental data tends to be a lagging indicator. Given the speed of the decline, it will be difficult to extrapolate forward. Needless to say, we are going to have a very severe global recession. The key determinants of whether it becomes something much worse will be how effective the stimulus is, how quickly we can start to return to greater normalcy and if global policymakers are able to work together. Over the next few weeks, I will be watching the evolution of the medical information on the spread of the virus and corporate earnings more than economic data.
I expect market volatility to remain elevated. I continue to like selling rallies and buying dips, as a clear direction in most markets is difficult to determine.
Be safe, remain strong and steadfast.
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
