Volatility Continues as Fiscal Stimulus Package Takes Shape

In just a matter of days, it seems, our lives have changed dramatically as we attempt to diminish the spread of COVID-19. We hope you and your loved ones are safe and well. With so much happening in a relatively short span of time, we] believe it’s important to offer our valued clients as much perspective as possible on the financial markets.

The economic effects of COVID-19 have accelerated quickly and the financial markets are experiencing heightened volatility. The major U.S. stock indices rise on positive news, such as the president’s call on Tuesday for lawmakers to pump $1 trillion into the economy, and fall when action does not come swiftly or new concerns emerge. On Wednesday, sharp declines triggered a so-called circuit breaker, briefly pausing market-wide trading.

Congress is working on a fiscal stimulus package. The U.S. Federal Reserve has cut its overnight lending rate to essentially 0% and restarted asset purchases, a process called quantitative easing. More importantly, the central bank has made other efforts to boost liquidity and to encourage banks to work with borrowers and use their capital buffers to ease credit strains.

“The biggest point we can make is to have patience and stay calm,” Raymond James Chief Investment Officer Larry Adam said. “There is significant fiscal stimulus coming.”

The fiscal stimulus discussion includes direct cash payments to individuals, support for small business loans, industry relief for airlines and hotels, other industry support such as tax credits, and changes to health programs, according to Raymond James Washington Policy Analyst Ed Mills.

“The broad agreement is a positive – the details will be the difficult part,” Mills said.

Raymond James Chief Economist Scott Brown anticipates there will be a decline in U.S. gross domestic product in the first and second quarters of 2020, though precise projections are challenging to make.

“Economic growth projections have been revised lower day by day and at this point are meaningless,” Brown said. “We do know the impact will be large and unprecedented. The key factors are how much of a hit the economy experiences, how long extreme social distancing lasts, and whether there will be long-term changes in consumer behavior.”

“This is a unique market with extreme volatility and widening spreads and is resulting in different behavior for Treasuries versus the market for products such as corporate and municipal bonds,” Managing Director for Fixed Income Doug Drabik said. “In time, we anticipate that fixed income and its risk characteristics will settle. Despite some of the anomalies, including pricing volatility, fixed income held in portfolios should maintain stable cash flows and income streams.”

Mike Gibbs, managing director of Raymond James Equity Portfolio & Technical Strategy, maintains caution for equity markets in the near term, but believes the rapid decline that has already taken place will present an opportunity for longer-term investors.

“The Fed is providing the liquidity necessary to ensure the financial markets continue to function properly,” Gibbs said. “The potential for a massive fiscal stimulus package will help cushion the blow we are going to see in the U.S. economy in the next several weeks and possibly months.”

As for our office, some things will change. For the time being, we plan to rely on phone and web conferencing to stay in contact with valued clients, like you. Someone from our office can help you prepare for a virtual meeting, including getting set up.

While our meetings may look a little different for the foreseeable future, please know that we will do everything we can to ensure you receive the same level of service and care you’ve come to expect from us. As always, you can monitor your portfolio 24/7 through Client Access. If you’d like to learn more about what the firm is doing, we invite you to read Raymond James CEO Paul Reilly’s latest message on raymondjames.com.

Know, too, that we are right beside you, ready to lend a listening ear and the support you need. Our focus is on promoting your physical and financial well-being in helpful and pragmatic ways. As always, you may reach us at 828-252-5132 or laura.webb@raymondjames.com or faith.doyle@raymondjames.com

If you have any questions or need special assistance, please reach out to us or any member of our staff.

Thank you for your trust.

Sincerely,

Laura Webb, CFP ®

President

Webb Investment Services

Faith Doyle, MBA, CFP®

Financial Advisor

82 Patton Ave Ste 610

Asheville, NC 28801

All expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.

Material prepared by Raymond James for use by its advisors.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC.