THE BEGINNING OF THE END

The end of the shutdown: On 4/16/20 President Trump announced a three phase plan to reopen the economy. The plan calls for a downward trajectory of COVID cases within a 14 day period prior to implementing phase one. That wording leaves a lot of room for interpretation. However you interpret it, the president has also stated that final decisions rest with the Governors. So ultimately, the interpretation of the plan only matters if Governors feel compelled to adhere to it. It appears many are doing their own thing. As I write this letter around 20 states have already reopened or will reopen their economies by May 1st. The definition of “reopen” is very subjective with Governors crafting their own designs for each phase of the reopening process. While the number of reopenings climb, evidence of states demonstrating a two week decline in new cases of the virus is spotty. Georgia is a prime example having drawn a lot of attention for their early decision to reopen. Here's a sample of that state's new cases of coronavirus as found in the John Hopkins University database:

4/7/20 1508 cases 4/14/20 1263 cases 4/17/20 1525 cases 4/22/20 1333 cases

Draw your own conclusions. Georgia may also reflect the ongoing struggle between economists and health care professionals. Doctors preach restraint while economists warn of the consequences of a sustained shutdown. The fact is many more people have been affected by the shutdown than infected by the virus. Given it's an election year, politicians may be doing some math. What policy keeps the most voters happy? Right now the answer appears to be aggressive reopening. Of course, that could backfire. Increased freedom might lead to a rebound in new corona cases, and the need to reinstitute shutdowns.

The end of normal: Markets have been optimistic recently, looking forward to getting the economy back on track. However, a removal of social restrictions does not automatically equal a resurgence of economic activity. Allowing people to go to restaurants and theaters may not lead to a return of sales to “normal”. Historically consumers are slow to return to their “normal” level of spending after an economic blow. Will this time prove to be different?

The end of guidance: All this uncertainty has been reflected in financial statements from publicly traded companies. Companies usually provide investors some “guidance” on what they anticipate sales and earnings to be in the coming months. Right now around 60% of companies are retracting and/or refusing to offer guidance. That leaves analysts flying blind. Most expect future earnings to take a pretty hard knock, but without guidance it's hard to say how hard and for how long. I expect first quarter earnings to drop 20%-30% with more pain in the second quarter.

The only thing for sure is uncertainty. Now is not the time to rush investment or social/health related decisions. Perhaps the most valuable commodity this year will turn out to be patience. Wait for it... if you can.

Frank Rizzo, Certified Financial Planner

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.