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
CARES Act
One-time Tax Rebates to Individuals$293
Expand Unemployment Benefits$268
Food Safety Net$25
Loans, Guarantees, and
Federal Reserve 13(3) Program Funding
$510
Small Business Administration Loans and Guarantees$349
Aid for Hospitals$100
Transfers to State and Local Governments$150
International Assistance$50
Other$555
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
973-549-4051

Chad Morganlander
Senior Portfolio Manager
973-549-4052

Matthew Battipaglia
Portfolio Manager
973-549-4047

Steve Lerit, CFA
Senior Risk Manager
973-549-4028

Tom Serzan
Analyst
973-549-4335

Suzanne Ashley
Internal Relationship Manager
973-549-4168

Eric Needham
Director, External Sales and Marketing
312-771-6010

Jeffrey Battipaglia
Client Portfolio Manager
973-549-4031

Disclosures

The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecast in this report will be realized or achieved. Employees of Stifel, Nicolaus & Company, Incorporated or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within. Past performance is no guarantee of future results. Indices are unmanaged, and you cannot invest directly in an index.

Asset allocation and diversification do not ensure a profit and may not protect against loss. There are special considerations associated with international investing, including the risk of currency fluctuations and political and economic events. Changes in market conditions or a company’s financial condition may impact a company’s ability to continue to pay dividends, and companies may also choose to discontinue dividend payments. Investing in emerging markets may involve greater risk and volatility than investing in more developed countries. Due to their narrow focus, sector-based investments typically exhibit greater volatility. Small-company stocks are typically more volatile and carry additional risks since smaller companies generally are not as well established as larger companies. Property values can fall due to environmental, economic, or other reasons, and changes in interest rates can negatively impact the performance of real estate companies. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. High-yield bonds have greater credit risk than higher-quality bonds. Bond laddering does not assure a profit or protect against loss in a declining market. The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains. Changes in market conditions or a company’s financial condition may impact a company’s ability to continue to pay dividends, and companies may also choose to discontinue dividend payments.

All investments involve risk, including loss of principal, and there is no guarantee that investment objectives will be met. It is important to review your investment objectives, risk tolerance, and liquidity needs before choosing an investment style or manager. Equity investments are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors to varying degrees. Fixed Income investments are subject to market, market liquidity, issuer, investment style, interest rate, credit quality, and call risks, among other factors to varying degrees.

This commentary often expresses opinions about the direction of market, investment sector, and other trends. The opinions should not be considered predictions of future results. The information contained in this report is based on sources believed to be reliable, but is not guaranteed and not necessarily complete.

The securities discussed in this material were selected due to recent changes in the strategies. This selection criterion is not based on any measurement of performance of the underlying security.

Washington Crossing Advisors, LLC is a wholly-owned subsidiary and affiliated SEC Registered Investment Adviser of Stifel Financial Corp (NYSE: SF). Registration with the SEC implies no level of sophistication in investment management.

Disclosures

The information contained herein has been prepared from sources believed to be reliable but is not guaranteed by us and is not a complete summary or statement of all available data, nor is it considered an offer to buy or sell any securities referred to herein. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. There is no guarantee that the figures or opinions forecast in this report will be realized or achieved. Employees of Stifel, Nicolaus & Company, Incorporated or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within. Past performance is no guarantee of future results. Indices are unmanaged, and you cannot invest directly in an index.

Asset allocation and diversification do not ensure a profit and may not protect against loss. There are special considerations associated with international investing, including the risk of currency fluctuations and political and economic events. Changes in market conditions or a company’s financial condition may impact a company’s ability to continue to pay dividends, and companies may also choose to discontinue dividend payments. Investing in emerging markets may involve greater risk and volatility than investing in more developed countries. Due to their narrow focus, sector-based investments typically exhibit greater volatility. Small-company stocks are typically more volatile and carry additional risks since smaller companies generally are not as well established as larger companies. Property values can fall due to environmental, economic, or other reasons, and changes in interest rates can negatively impact the performance of real estate companies. When investing in bonds, it is important to note that as interest rates rise, bond prices will fall. High-yield bonds have greater credit risk than higher-quality bonds. Bond laddering does not assure a profit or protect against loss in a declining market. The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains. Changes in market conditions or a company’s financial condition may impact a company’s ability to continue to pay dividends, and companies may also choose to discontinue dividend payments.

All investments involve risk, including loss of principal, and there is no guarantee that investment objectives will be met. It is important to review your investment objectives, risk tolerance, and liquidity needs before choosing an investment style or manager. Equity investments are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors to varying degrees. Fixed Income investments are subject to market, market liquidity, issuer, investment style, interest rate, credit quality, and call risks, among other factors to varying degrees.

This commentary often expresses opinions about the direction of market, investment sector, and other trends. The opinions should not be considered predictions of future results. The information contained in this report is based on sources believed to be reliable, but is not guaranteed and not necessarily complete.

The securities discussed in this material were selected due to recent changes in the strategies. This selection criterion is not based on any measurement of performance of the underlying security.

Washington Crossing Advisors, LLC is a wholly-owned subsidiary and affiliated SEC Registered Investment Adviser of Stifel Financial Corp (NYSE: SF). Registration with the SEC implies no level of sophistication in investment management.