Insights

After a sudden and severe contraction driven by many state government-mandated shutdowns, the U.S. economy rebounded sharply in the second quarter. Amid a race to contain the spread of the coronavirus, the economy nearly ground to a halt beginning in March and is forecast to contract 12.8% from the start of the year through the end of June. Compared to the two prior recessions of 4.0% during the Financial Crisis of 2008/2009 and less than a 1% decline during the technology bubble burst of 2000, March saw the second largest post-war decline in economic output, as shown in the accompanying chart.

There has been much attention paid to key parts of the law that deal with loans to small businesses, and the difficulties that many have encountered in actually obtaining these loans, but there are other provisions that affect a broad spectrum of taxpayers.

Foundation clients of Howland Capital are turning their focus to address the COVID-19 crisis by providing critical support to organizations serving the community. In this time of need, it can be challenging to identify how giving will directly impact those who need it most.

Beyond cutting rates, the Fed also went much further, as we described earlier in this Commentary. It announced several billion dollars of asset purchases – for the first time targeting corporate and municipal bonds in addition to treasury and mortgage bonds. Other central banks around the world have announced similar measures as part of a coordinated global response. The already bloated Fed balance sheet could double from four trillion dollars to as much as nine trillion dollars as it intervenes to stabilize and backstop the bond market. While the Fed’s action echoes the prior financial crisis of 2008 / 2009, the root causes of the problem are different. During the financial crisis, the underlying concern was credit and counterparty risk – the fear that corporations and banks, in particular, did not have sufficient assets to meet their financial obligations. This time, banks are very well capitalized and there is less leverage in the financial system.

Lisa McEwen and her husband welcomed their first child, a baby boy, in November. Everybody is doing well and healthy. Connor Bucklen joined the Howland Capital Team in September. “Upon starting work at Howland Capital six months ago I was immediately welcomed to the team. I feel lucky to have found myself working alongside such a cohesive and highly experienced group of individuals, and I look forward to spending more time as part of the Howland Capital team.”

In the U.S., the S&P 500 Index (price plus dividends) declined 19.6% in the first quarter, and 24% from the February 19th high of 3,394. Outside the U.S., global stock prices, as measured by the MSCI All Country Worldwide Ex-U.S. Index, declined 23.3%.

Governments have responded with drastic containment measures that have brought about abrupt changes to everyday life. Quarantines and social distancing have replaced our daily routines of school, work, and leisure activity. Times Square is empty and in Paris, cafés are closed. Main Street USA is no different, with shuttered storefronts, business closures, and restaurants resorting to “take-out only” to try to stay afloat. The immediate economic impact is evident in the initial claims for unemployment.

To our Valued Clients and Trustees: In a cooperative effort to keep our clients, employees, vendors (and families) safe, we have transitioned all of our employees to a fully remote workforce, effective immediately.  This means that our Portfolio Managers, Administrative Staff, and Trading/Operations Team are now working outside the office, but are fully reachable by phone and email.  Our Tax Professionals continue to prepare returns as we work towards the April 15th filing deadline. We have taken these steps as a precaution in accordance with best practices designed to minimize the spread of the COVID-19 virus.

COVID 19 – Latest Data

By definition, disasters are unpredictable and take many forms, with COVID-19 being the most recent example. Our Business Continuity Plan allows employees to work remotely and effectively. We are moving forward with plans to have approximately half of the firm work from home for two weeks at a time on a rolling schedule. We believe this action will reduce the risk that our employees will come into contact with the virus so that we can continue to deliver uninterrupted service to our clients.

Having joined the firm about the same time everybody was worried about Y2K, she has been a consistent and upbeat presence at the firm, as well for the clients with whom she works. She has balanced her dedication to her profession with her family commitments which includes raising two delightful twin girls. She is our “go to” person for all things retirement and we look forward to at least another 20 years with her in our midst. Congratulations Lexi!

One in particular addresses important retirement security measures (the SECURE Act) mentioned in our fall edition of Taxing Matters.