July 2020 Monthly Outlook – Diagnosing a Recovery

As the world continues to deal with the effects of COVID-19, racial injustices and rising geopolitical tensions, recent data signal that the worst of the economic damage is likely behind us. Data show sequential improvement for most of the world’s key economies, a trend that will probably continue in the short term. Longer-term, there’s an emerging consensus for a quick and complete recovery, but I have a different view.

I believe that we’re past the cycle low for the economy and the financial markets, and that the recovery is under way. However, I suspect the speed and magnitude of the global policy response are responsible for the rapid transition into recovery mode.

Despite this, I caution people from making the wrong conclusions based on the massive scope of the global policy response, and I advise against annualizing temporary spending programs and one-time payouts. Some forms of temporary spending may become permanent, but I doubt government spending will double in size permanently. We are also going into a Presidential election cycle so cooperation in Washington is likely to be limited.

In short, I don’t expect a “V-shaped” recovery. I predict a “square root-shaped” recovery. Initially, a “V-shaped” and “square root-style” recovery will look identical. The early phase of the recovery, probably lasting through the summer, will be “V-shaped,” followed by a gradual rise in the fall and beyond. However, I expect momentum to slow after the initial reopening of the economy. The most recent GDP forecast revisions are now projecting that the economy will completely recover 2019 levels by 3Q’21.  I believe there is some long-term scarring to the economy, much of which won’t be evident immediately.

I don’t expect the economy to return to 2019’s GDP level until 2022. It usually takes several years for the economy’s post-recession recovery to return to its pre-recession pace. Growth rates may look nearly identical after the initial bounce, but as I watch economic activity levels, I see a path below pre-COVID levels for some time to come.

Figure 1: Illustrative Growth Paths for US Real GDP
(indexed to 100 as of 12/31/19)


Source: Blackstone

Now with COVID-19 spreading again, this has caused several states to rethink how fast to reopen just as the first round of stimulus wears off.  The jump in daily cases has created some renewed volatility in the financial markets, and it merits watching, but it has yet to knock stocks off course. Ultimately, the path of the virus will play the biggest role in how the financial market and economic outlook unfolds going forward.


Source: Strategas Securities

Most major stock market indexes are still negative YTD, with technology (NASDAQ) being the one winner.  I expect the broad stock market (basis S&P 500) to continue to move higher, albeit with increased swings up and down, to end the year flat at around 3,230 – around 4% higher than were it ended June.  I continue to adjust portfolios as I see threats and opportunities.

Table 1: Key Index Returns




Dow Jones Industrial Average



NASDAQ Composite



S&P 500 Index



Russell 2000 Index



MSCI World ex-USA*



MSCI Emerging Markets*



Bloomberg Barclays US

Aggregate Bond TR



Source: Wall Street Journal, MSCI.com, Morningstar, MarketWatch

MTD returns: May 29, 2020-June 30, 2020

YTD returns: Dec 31, 2019-June 30, 2020

*in US dollars


P.S. Thank you for your referrals. They are making a big difference in my practice. Feel free to share my name with your friends on Facebook or LinkedIn.

I want to extend a special thanks to clients & colleagues who have recently referred us to family and friends:

Anna P.,    Ray C & Carolyn B.


July Calendar of Events   (comments and additions for future months are always welcome)

  • July is National Picnic and National Parks month – please practice safe Covid-19 steps – crazy to have to say that


July 1st             Bureau of Internal Revenue (the IRS) founded in 1862– betcha nobody celebrates this birthday 

July 4th            Independence Day  – it will certainly be a different kind of celebration this year

July 11th          My daughter Ryan’s birthday

July 23rd         National Ice Cream Day   – Breyers vanilla with Hershey’s chocolate syrup is my go-to


I hope you find this information helpful.  Please share it with family and friends.



Sources:  Blackstone, Strategas Securities, Horsesmouth



Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

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