This Week from Jesse Hurst

Jesse W. Hurst, II
How DEEP and How WIDE??
They say that a picture is worth 1,000 words. In the case of the picture below, a picture is actually worth trillions of dollars.
Our friends at JPMorgan Asset Management provided us with a chart of all of the recessions since 1910. They show both the duration of the recession by number of years, and the severity of the recession based on the percentage of GDP decline, which is represented by the size of the circle.
As you can see, the Great Depression, which lasted years, was our most severe decline. We saw GDP drop 26.7%, meaning that we lost more than a quarter of the entire US economic output during that time period.
While most recessions feel awful and the media trumpets how horrible things are while we are in the midst of them, you can see from the chart that most of them are not that severe in terms of GDP loss. Prior to this year's COVID-19, coronavirus induced recession, the most severe downturn we had seen since the Great Depression was the recession that occurred just after World War II. At that time, we were demobilizing the war machine that supported the effort both in the European and in Asian theaters. That downturn caused the US economy, as measured by GDP, to decline by 12.7%.
All recessions feel painful when you are in the middle of them. This includes the 3.1% contraction felt in the early 1970s during the Arab Oil Embargo, the double dip recessions that of the early ‘80’s that were each -2%-2.5%, as the Federal Reserve Bank was raising interest rates in an effort to squash hyperinflation.
We even note that the Great Recession that coincided with the financial crisis from October of 2007 to June of 2009 saw a 4% contraction. This was the largest since the post-World War II recession. Most of us remember living through the market volatility and daily headlines. It was a scary time for the financial system, which was teetering on the brink due to significant losses related to defaults in subprime mortgages, too much leverage and reckless real estate lending standards. 
That bring us to 2020 and the COVID-19 recession, which is by far the worst recession we have had since World War II, but it may also turn out to be one of the shortest. This recession was self-induced via economic shut-downs, social distancing, and quarantines meant to bend the curve and slow the initial spread of the coronavirus outbreak. As these restrictions were lifted and massive fiscal and monetary stimulus were thrown at the economy, fears of a contraction rivaling the Great Depression, proved to be overstated and untrue. 
The economy suffered its worst quarterly contraction since The Great Depression in the April to June time period of this year. However, this was followed by the strongest quarter ever in U.S. history as the economy began to reopen. The combination of the CARES Act, a $2.2T stimulus package passing, along with the Federal Reserve bank cutting interest rates and opening up a number of lending and liquidity facilities in order to back the bond market and banking system has allowed the economy and the job market to rebound more quickly than anybody would have expected.
As a matter of fact, the Atlanta Federal Reserve Bank tracks GDP on a real-time basis. They are currently projecting that fourth quarter GDP could rebound as much as an additional 11%. If that were to happen, we would completely recover the economic losses of the first and second quarter...all in the same year!! That's still a big IF, but we will likely get there sooner than later. This is all helped by the fact that the election is moving into the rearview mirror and the vaccines are coming into view through the windshield of the future. That would make this not only the deepest but shortest recession that we have had in over 70 years. 
There are a lot of negative headlines being trumpeted by the media that cause great fear for people. We thought that this chart and explanation would help put things in their proper context. We know it is hard to fight emotional battles with factual retorts. However, we believed that this picture and narrative was a story worth telling. It is important that we understand the rest of the story as we continue “Moving Life Forward”. 
Weekly Market Commentary
January 4, 2021

The Markets
Last week was the cherry on top of a turbulent year for investors.

After the $900 billion fiscal stimulus bill was signed on Sunday, major U.S. stock indices moved higher. The Washington Post reported, “The S&P 500-stock index, the most widely watched gauge, is finishing the year up more than 16 percent. The Dow Jones Industrial Average and the tech-heavy Nasdaq gained 7.25 percent and 43.6 percent, respectively. The Dow and S&P 500 finished at record levels despite the public health and economic crises.”

U.S. Treasuries gained, too, as yields moved slightly lower. Thirty-year Treasuries finished the week yielding 1.65 percent. While government bonds didn’t offer attractive levels of income during the year, they “…lived up to their billing as a stock market hedge in 2020. Rates plunged as stocks collapsed in March, and the Treasury market finished 2020 with yields not much above the pandemic panic lows and down half a percentage point or more for the year,” reported Barron’s.

The Year in Review

Early in 2020, despite the COVID-19 outbreak in Wuhan, China, the possibility of a global pandemic was not on investors’ minds. Financial markets were concerned about:

  • Slowing U.S. economic growth
  • Rising tensions between the United States and Iran
  • Ongoing trade tensions between the United States and China
  • The pending U.S. presidential election
  • The United Kingdom’s Brexit negotiations

As the COVID-19 virus began to spread across the globe, stock markets dropped sharply around the world and the longest bull market in U.S. history came to an end. The downturn reflected doubts about the U.S. government’s response to the crisis. In mid-March, Axios reported, “While central banks around the world are stepping in, it’s unclear what measures – if any – the Trump administration will be able to get through Congress to stem the economic pain.”

Before the end of the month, attitudes shifted as Congress responded to the coronavirus juggernaut by passing the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. The measure received overwhelming bipartisan support and was quickly signed into law.

The CARES Act and central bank support inspired optimism in financial markets. The bear market in the S&P 500 Index became the shortest in history, lasting just 33 days, according to Reuters. From late March through August, despite significant economic damage and persistent virus spread, the S&P 500 recovered its losses, gaining about 55 percent.

The economy also began to recover in the second quarter, and the United States saw gains in employment, consumer spending, and other economic data, reported Deloitte. However, by late July, there were signs the recovery might be faltering.

“Daily credit card spending, which by early April had declined 32 percent from the pre-COVID level, was up to just 4.7 percent below the pre-COVID level on June 22. But, by July 19, it was falling, down 6.4 percent. Initial weekly claims for unemployment insurance stalled at 1.4 million – a huge number suggesting that job losses were continuing. And, the Census Bureau’s weekly Household Pulse survey found more people unemployed in late July than at the beginning of the month,” reported Deloitte.

Congress went back to work and spent much of the latter half of 2020 negotiating a new stimulus bill, which passed last week, and $600 stimulus checks have begun arriving in Americans’ bank accounts. In the meantime, several COVID-19 vaccines have been developed and approved, and inoculations have begun in several countries.

Vaccine availability boosted financial market optimism. Investors anticipate vaccines will bring the coronavirus under control and usher in a return to business-as-usual by mid-2021, reported CNBC.

We wish you a happy and prosperous New Year!
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch,, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
THERE'S A NEW ADDITION TO THE AIRPORT SECURITY TEAM. Dogs may be some of the world’s most effective disease detectives.

In January, before COVID-19 was known to have arrived on our shores, NPR wrote about the dogs’ ability to smell disease. The host of Medical Monday interviewed Maria Goodavage, author of Doctor Dogs: How Our Best Friends Are Becoming Our Best Medicine, who said:

“With ovarian cancer, there's not much great testing for early detection. I heard about these dogs at the University of Pennsylvania Veterinary Working Dog Center that are able to smell ovarian cancer. They're able to detect it as early as stage one. We're not even talking tumors here. They're able to detect ovarian cancer in one drop of plasma from a woman with ovarian cancer.”

Doctor dogs also are being trained to detect the novel coronavirus. Reuters reported, “A study recently found dogs can identify infected individuals with 85 percent to 100 percent accuracy and rule out infection with 92 percent to 99 percent accuracy.”

Airports in Chile, the United Arab Emirates, and Finland have begun using teams of dogs to identify passengers who may be afflicted with the disease. Passengers and dogs do not interact directly. Instead, volunteers wipe gauze over their necks and wrists and place the gauze in a jar. The dogs smell the gauze to determine if COVID-19 is present.

Dog disease detectives could help restore consumer confidence in air travel and provide a layer of protection against infection. If the dogs are successful in airports, they may be deployed to hospitals, nursing homes, sports venues, and cultural events, said a Finnish professor of equine and small animal medicine who was cited by

Weekly Focus - Think About It

“A person can learn a lot from a dog, even a loopy one like ours. Marley taught me about living each day with unbridled exuberance and joy, about seizing the moment and following your heart. He taught me to appreciate the simple things – a walk in the woods, a fresh snowfall, a nap in a shaft of winter sunlight. And, as he grew old and achy, he taught me about optimism in the face of adversity. Mostly, he taught me about friendship and selflessness and, above all else, unwavering loyalty.”
--John Grogan, Author

Best regards, 
Jesse Hurst CFP ®, AIF®
Invesmtent Advisor Representative
Impel Wealth Management 
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* These views are those of Carson Coaching, and not the presenting Representative, the Representative's Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client's portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as "The Dow," is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
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