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Current Views

Equity Markets Up, Economy Down?

Could the financial markets have seen the shortest bear market in history or could equity markets re-test their March 23rd lows?  It appears that the stock market’s own outlook is that it has already “put in a low” based upon the dramatic rebound we’ve seen.  However, this rebound is in sharp contrast to what we have observed in global and U.S. economic indicators.  This is a wonderful demonstration of the stock market’s discounting mechanism and how forward-looking it tends to be.  In our view, in order to explain the disconnect between the indicators and the market, it’s important to look at the progress that is being made in the war against the coronavirus.

The rapid response of fiscal and monetary policies to this crisis has been impressive and stabilizing.  The Federal spending and lending programs have their flaws, but together they have started to carpet bomb the streets with money in support of consumers, small companies, investors in all types of bonds from government to high yield, and issuers of municipal bonds, not to mention targeted industries like the airlines.  While it is not perfect, it does appear that the “fix is in”.  As a result, equity markets have rallied sharply, and fixed income credit spreads have narrowed.  For investors, it is now back to “risk on”.  Don’t fight the Fed!

It appears that financial markets are starting to price the shutdown as if it may be coming to an end sooner rather than later; perhaps sooner than the many more months believed in some early forecasts. And indeed, more recent political arguments are about the pace of reopening businesses, rather than closing them down.  There is some evidence, albeit still limited, that more people than widely believed may be walking around with antibodies to the virus, implying that they’ve already been infected but were asymptomatic.  Regardless, coronavirus curves appear to be flattening and some states are putting target dates on re-opening in some way.  There are many stories about why some hot spots may need to reopen at a much slower pace.   

With the apparent progress on the virus and the turn in the financial markets, the expectation is that the economy may be on the upswing later this year.  Maybe the recovery won’t look like a “V” and it’ll look more like a “U”, but we are all getting cabin fever.  There could be an explosion of consumer spending and a surge of cap ex as supply chains are re-jiggered.  There also could be post-crisis aftershocks, because everything won’t come back online at once.  There will still be cautious approaches to gathering in public places and some consumers may have to eventually start saving more, which would reduce spending. 

It is impossible to know exactly to what extent, and for how long, the pandemic will dampen economic activity, but we believe in the resilience of the American economy, and despite the potential for short-term volatility, we remain optimistic over the medium term.



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

Past performance is not a guarantee of future results. Indices are unmanaged and cannot accommodate direct investment. Themes assigned as per Roosevelt Investments’ evaluation. Risk tools may include cash or other securities that we believe possess a low or inverse correlation to the overall market.


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The Roosevelt Investment Group, Inc. is an independent investment management firm that is not affiliated with any parent organization. The Roosevelt Investment Group, Inc. manages equity, fixed income, and balanced assets for primarily U.S. clients. The Roosevelt Investment Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission and notice filed in all 50 states.

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