We continue to see improvement in several indicators from a very weak second quarter. It is likely that, after a 30% annualized drop in GDP in Q2, Q3 could see a 25% annualized rebound. Progress is also seen in weekly data such as the Federal Reserve Bank of New York’s Weekly Economic Index (WEI). This index tracks ten daily and weekly indicators of real economic activity scaled to align with the four-quarter GDP growth rate (Chart A, below). The WEI spotlights consumer behavior, the labor market, and production weekly. As beauty is in the eye of the beholder, so too is the interpretation of this chart. The economy continues to grind higher week by week but remains far depressed from pre-COVID levels. Steady-as-she-goes for now is our take so long as improvement persists.

Chart A

Health Trends Mostly Good

Supporting the recovery in the economy is a reasonably supportive healthcare backdrop. This is not to say we do not see continued cases and deaths, but the rate of increase in cases globally is flattening and in the United States is trending lower (Chart B, below). However, we cannot take these trends for granted. Countries like Germany, Spain, France, South Korea, Japan, and Italy have all experienced uptrends in cases recently. Such spikes make it hard to return to life as normal, and threaten job creation and economic recovery in those countries.

Chart B

Election Focus

As we head toward elections this fall, investors’ spotlight will turn to issues likely to impact the economy. How much and in what ways to continue existing fiscal programs will be key. Existing programs, including the Paycheck Protection Program, Health Care Enhancement Act, and the CARES act, provided an infusion of nearly $3 trillion to the private sector recently (Table A, below). Monetary policy actions, including cutting interest rates, $3 trillion in asset purchases, backstopping credit markets, easing lending conditions, and providing forbearance, also provided much relief to the private sector.

There are significant questions about the extent and method of providing support to the private sector during the upcoming months. As elections approach and Congress debates pathways to provide COVID-19 assistance to households, businesses, state and local governments, investors will be looking for clues as to what comes next. For now, we are keeping a steady-as-she-goes approach. CONQUEST tactical asset allocation portfolios are moderately overweight stocks versus bonds given improving trends, for example. We are also continuing to focus heavily on balance sheets and cash generation abilities of companies in equity portfolios we manage. So, at least, the improving trends in the data are taking the lead in our assessment of conditions. At some point, this could change. But, for now, it is “steady-as-she-goes.”

Table A

COVID-19 Economic Stimulus ProgramsBillions $
Fiscal Programs
Paycheck Protection Program (PPP) and
Health Care Enhancement Act
Forgivable Small Business Loans$321
Small Business Loans & Grants$62
Hospital Grants & Loans$75
Expand COVID Testing$25
PPP & Health Care Enhancement Act$483
One-time Tax Rebates to Individuals$293
Expand Unemployment Benefits$268
Food Safety Net$25
Loans, Guarantees, and
Federal Reserve 13(3) Program Funding
Small Business Administration Loans and Guarantees$349
Aid for Hospitals$100
Transfers to State and Local Governments$150
International Assistance$50
CARES Act$2,300
Monetary Programs
Federal Reserve
Cut Policy Rate to Zero
Purchased Assets$3,0001
Committed to Support Flow of Credit$1151
Encouraged Banks to Lend and Make Loan Modifications
Eased Capital Requirements
Eased Regulatory and Supervisory Requirements
Gov’t Agencies:
Provide 12-Months of Mortgage Forbearance
Provide Loan Modifications
Suspend Late Fees / Credit Reporting
Grand Total Fiscal and Monetary$5,783
1. As of August 2020

Kevin R. Caron, CFA
Senior Portfolio Manager

Chad Morganlander
Senior Portfolio Manager

Matthew Battipaglia
Portfolio Manager

Steve Lerit, CFA
Senior Risk Manager

Paul Clark, CFA
Senior Portfolio Manager
Municipal Fixed Income

Rick Marrone
Senior Portfolio Manager
Municipal Fixed Income

Suzanne Ashley
Internal Relationship Manager

Eric Needham
Director, External Sales and Marketing

Jeffrey Battipaglia
External Sales and Marketing


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