April 24, 2020
Oil prices drove markets lower this week as the West Texas Intermediate (WTI) crude oil benchmark hit a historic low. The May contract for WTI fell $55.90 on Monday to a history-making -$37.63 a barrel. The decline was driven by plunging demand for oil amid the global pandemic just as producers continued to pump supply into an oversupplied market with no excess storage capacity. By week’s end, oil prices rebounded on planned OPEC+ production cuts on May 1st and hopes that U.S. producers would soon follow in their footsteps. Stocks got a boost later in the week from steadier oil prices and the passage of a $484 billion government relief package, the second such package passed in recent weeks. The aid is directed towards small businesses, hospitals, and testing. Economic data remained dismal as another 4.4 million people filed for unemployment benefits, bringing the five-week cumulative total to 26.4 million. Meanwhile, existing and new home sales along with durable goods orders added to the growing pile of weak economic reports. For the week, the S&P 500 fell -1.32%.
Coronavirus Hits Real Estate Market
A healthy real estate market succumbed to coronavirus in March. Existing home sales fell 8.50% to an annualized 5.27 million units. The supply of homes fell a sharp 10.20% annually as sellers de-listed their properties, not wanting potential buyers touring their homes in person amid the pandemic. Sales of new homes also fell in March, falling 15.40% to a seasonally adjusted annual rate of 627,000 units. The declines are the beginning of what is to come: the real estate market is poised to remain weak with sellers wary of listing their homes for in-person tours and buyers hesitating to make offers amid rising unemployment.
Transportation Sector Pushes Durable Goods Orders Down
New orders for durable goods fell $36 billion or 14.40% in March to $213.2 billion, their biggest monthly drop since August 2014. The decline was driven by a sharp drop in aircraft, cars and spare parts as demand for transportation goods dried up. Aircraft and parts saw the biggest decline in new orders, falling more than $16.3 billion month-to-month for a 296% decline. New orders for automobiles and parts also fell, down 18.40%. Excluding the volatile transportation sector, orders were down a much more modest 0.20%, supported by a rise in defense spending. Not surprisingly, demand for durable goods are expected to remain under pressure as consumers and businesses alike continue to rein in spending.
Overall, stocks posted their first weekly decline in three weeks as the government’s second stimulus package failed to boost markets following the historic plunge in oil prices on Tuesday. The S&P 500 has managed to settle into a 2700-2800 range as we’ve now entered a bouncy transition period somewhere between the coronavirus panic of late March and the upcoming summer when the market is hoping the economy will be back open for business. Although consumers and businesses are eager to get back to normal, the reality is that the resumption in activity is likely to be measured. Asia, which is several weeks ahead of the U.S. and Europe in their crisis management, has already re-opened some businesses, but the combination of continued social distancing requirements and a wary consumer so far only reflects modest improvement. The quarterly earnings results that were released this week only underscored the unevenness of COVID-19’s effect. Stocks such as Procter & Gamble (consumer goods), Kimberly Clark (paper products), and Domino’s Pizza (food delivery) all posted strong results this week as individuals stayed home, stocked up and ordered in. Casino operators (Las Vegas Sands, Monarch Casino and Resort), consumer lending firms (Ally Financial, Discover Financial), and oil pipelines (Kinder Morgan) all suffered large losses as aggregate demand dried up and individuals have begun defaulting on their debts. In some way, Q1’s earnings season, and Q2 to a greater degree, will shape up to be a story of economic Darwinism. We are already seeing firms big and small alter their business and delivery models to accommodate remote interaction in the age of COVID. For those that can’t – like JC Penney, for whom this week it was reported is negotiating its bankruptcy – COVID is accelerating an already harsh reality with many notable brands at risk of extinction.
The Week Ahead
We’ll find out how hard coronavirus hit the U.S. economy as the Bureau of Economic Analysis releases its first estimate of Q1 GDP. Also on tap is the Federal Reserve’s first post-coronavirus FOMC meeting.
Saving Your Sanity: Working from Home During COVID-19
This week, one of our advisors, Whitney Magers, Certified Financial Planner®, is sharing tips for adjusting to the new normal of working from home. Whitney has summarized a few key Sanity Saving Survival Tips below to help everyone navigate what can be a chaotic and stressful situation and to hopefully make working from home more peaceful and productive for individuals and their households.
SURVIVAL TIP #1: STAKE OUT YOUR SPACE
One of the big challenges when it comes to working remotely is keeping your work and home lives separate. Setting up a dedicated place to work can help. It doesn’t have to be its own room, but it should feel as separate from the rest of your home as possible. Create signals to let your family or roommates know the rules of play. For example, having your headphones off can be a signal it’s an okay time to drop in, whereas wearing headphones or closing the door (if you have one) makes it clear interruptions are not welcome.
SURVIVAL TIP #2: EMBRACE THE NEW BUSINESS CASUAL
The bar is low, literally. It’s okay to adopt a more casual attire while working from home but keep everything above the waist professional and video-friendly. Find clothes that make you comfortable by all means, but also find clothes that signal to you and your household that you are beginning your workday and that it is time to be more productive.
SURVIVAL TIP #3: FUEL YOUR BRAIN AND BODY
Research shows that our brain performs better when we take regular breaks. Short breaks give your brain needed time to store and process information effectively. Whether it’s taking a walk or listening to a podcast, do something that renews and energizes you as you move through each part of your day to enhance focus and productivity. Fuel your brain and body by sleeping well, eating healthy, and drinking ample amounts of water throughout the day.
SURVIVAL TIP #4: SCHEDULES ARE YOUR SALVATION
The structure of a schedule can help keep you on track, particularly as the days begin to blend together and the line between work and home blurs. A schedule signals when it’s time to focus and when it’s time to detach professionally without ambiguity or guilt. Identify your weekly and daily priorities and when you will accomplish them. If you can, try to begin and end your work day at the same times that you would if you were going into the office. Maintaining as much of your normal work routine as possible, including waking up at your usual time and getting ready for the day, can help you to feel grounded and in control.
SURVIVAL TIP #5: COMMUNICATE, COMMUNICATE, COMMUNICATE
During times of stress and uncertainty, the need for quality, consistent contact with your team, your boss, your direct reports, and staff is more important than ever. Come up with a plan that lays out expectations for how often you should check in and how you’ll convey any changes or new assignments to one another. Company-wide chat and project management platforms are great at organizing priorities, but be sure to talk frequently with your key co-workers to bridge the distance. The concept is the same for those in your household. Open lines of communication within your home and with family members or roommates is essential to saving everyone’s sanity. Two important elements that need to be communicated on a daily basis are: 1) the logistics of the day for your home and your work life and 2) the emotional state of your family, friends, and co-workers.
If you have children living at home, consider making a daily or weekly plan that communicates the expectations around work space, work or school hours, and any quiet time that may be required for conference calls or online school.
SURVIVAL TIP #6: IT DOESN’T HAVE TO BE PERFECT TO BE GOOD
No matter how well you follow the tips above, it can still be challenging to manage working from home. Distractions and interruptions are inevitable. Give others-and yourself-grace when this occurs. In times like these, take a deep breath and remind yourself, “It doesn’t have to be perfect to be good.”