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COVID-19 Update #2
While the past few weeks have felt like months (especially if you have a child at home), a lot has happened.
Building on what we talked about in our last post, there continues to be a lot to mention regarding advancements in the fight against COVID-19. We started the week off on a strong note with the announcement that Johnson & Johnson identified a lead vaccine candidate, with expedited trials starting in September and the potential to bring it to market by early 2021. This timeline is among the fastest available to bring a product to market safely – amazing since it typically takes years of research just to find a candidate. Other powerful news came when the FDA approved its first antibody test. What makes this test so powerful is that as the test becomes more widespread, we can identify the people that have developed the antibodies and allow our country to get back to work more quickly. This came days after false news broke about the FDA approving an antibody test that could detect the coronavirus within two minutes. The FDA is also allowing what's called plasma treatment (for some of the most severe cases). This is where they take the plasma from someone who has (naturally) developed the antibodies to defend against the virus, and then injecting the plasma into someone who is currently sick.
It wasn't all good news though. The U.S. intelligence community reported what many people suspected; China has been underreporting the numbers of infections and deaths. The reason why that's so harmful is that there is a chance, had we known more about the virus earlier on, that we could have done more to protect everyone. That being said, we don't live in the world of what could have been, but the world that is (and we are learning at a record-breaking pace)!
The big item this past week was the official approval of the $2 trillion stimulus package. The package includes checks of $1,200 per adult, plus $500 for each qualifying child, subject to caps and phase-out limits. The bill also increased the cap on unemployment benefits by $600/week, waived the one-week waiting period, and expanded the maximum claim period by an additional 13 weeks. For retirees, Required Minimum Distributions are waived for 2020. The bill also makes numerous government-backed loan programs available to businesses of all sizes. For smaller businesses, these the most notable is the Payroll Protection Program, which issues 100% government-insured (meaning banks won't be adversely affected by issuing them) for up to 2.5 months worth of payroll costs. For businesses that maintain their prior employment levels, with some exceptions, up to eight-weeks or payroll and some overhead expenses can be fully forgiven! For those who take the loans and cut salaries or lay off some of their employees, the forgivable amount will be reduced. Remember those things called Buybacks that dominated headlines for months? Well, part of the bill restricts large corporations who receive government funding from doing buybacks until that money has been repaid.
There are a great deal of details and other provisions within the CARES Act. Fortunately, we have read through the majority of it already. If you want to know more about the bill, and what you may qualify for, please feel free to contact us and we'll help you understand what may be available to you and what you may want to consider. Love or hate the administration, both parties are fighting to help Americans stay employed, pay their bills, and keep businesses afloat.
Since the CARES Act wasn't approved until last Friday, and some of the programs and money weren't available yet, layoffs continued. The initial jobless claims was a record-breaking 6.6 million. Just like last week, however, the US markets rallied the same day those numbers were released. It might appear counter-intuitive at first blush, but remember, stocks are valued based on future expectations. This means that Wall Street expected these claims to come back in this range. In tandem, the continuing jobless claims have not moved up as sharply as the initial claims so far, showing that some people were able to find work, or were rehired by their employers, even with much of the country on lockdown. Much of the other numbers that came out this week, and those that will continue to be released over the next few weeks, won't be very impactful since they are based on February's economy (before all this became widespread). Going forward we will be looking to signs of economic recovery such as disparities between initial vs continuing unemployment claims, states allowing companies to resume business again, and the spread rate of the virus.
Closing Comments
Let's take a second to recognize that each one of the unemployment "claims" I mentioned earlier is a human life that has been financially impacted by this epidemic. We should all consider doing something to help our fellow Americans. Here is a story outlining what others are doing to help.
Please continue to be safe and responsible during these uncertain times. While you're doing your part, we will continue to help you Traverse these turbulent markets.
COVIDEconomic Update