May 13, 2020

Good morning,

Dr. Anthony Fauci rattled the investment markets yesterday after warning that re-opening the U.S. economy too soon may have dire consequences.  For the last several weeks, hopes had been growing that individual states would begin reopening their economies, leading to more widespread business activity and a recovery in employment, helping stocks find reason to climb.

This morning, Federal Reserve Chairman Jerome Powell took a cautious tone when speaking of the recovery of the U.S. economy.  Saying that the economy will substantially recover from the effects of the coronavirus shutdown, he suggested that recovery may come more slowly than previously thought.  Unemployment, a key indicator of economic activity and growth, has continued to grow in recent weeks - but at a decreasing rate.  Powell stated he believes unemployment will peak within the next month.  “And then as we return to more normal levels of economic activity, it’s a reasonable expectation that unemployment will start to decline again and it may decline sharply.”

We are in no doubt at a critical point in dealing with the coronavirus and the U.S. economy.  While there is, as Dr. Fauci suggests, a risk of reopening the economy too quickly and sparking a new round of infection, the risk of keeping American businesses closed for too long is also very real.  It has been estimated that if the economy doesn’t begin some sort of careful, phased-in reopening very soon, up to 40% of the millions of lost jobs may never come back.

In California, Gov. Newsome has announced such phased-in openings of certain businesses.  It will be very welcomed to see how local businesses can safely reopen and get back to some semblance of normal.