Even casual fans of jazz – which we believe to be the great American art form – can easily recognize the opening cords to The Dave Brubeck Quartet’s classic, “Take Five.” Released in 1959 and penned by the quartet’s alto saxophonist Paul Desmond, “Take Five” was the first jazz single to sell one million copies and is the biggest selling jazz single of all time. So, with apologies to the great Dave Brubeck and The Dave Brubeck Quartet, here is our “Take Five,” or five things we think are worth thinking about as we move into the second half of 2020.
- We are a ways away from November. We would advise against getting too caught up in Presidential (or Congressional) polling today. Regardless of the outcome of the election, we see the odds of a dramatic shift in fiscal policy – at least near term – as low. Said differently, fiscal policy will likely remain supportive of the economy for the foreseeable future.
- The big stock market rally is real and rationale. The policy response (monetary and fiscal), the market as a leading indicator, and now improving economic data all speak to that point.
- Deficits don’t matter, at least for now. The bond market is behaving itself and so is the US dollar. The fiscal policy response is appropriate and warranted given the demand destruction of early 2020. For now, investors have no problem with the pace and scale of government borrowing and spending.
- Don’t fight the Federal Reserve. The Fed has been and will continue to be exceptionally supportive of risk assets and the real economy. Consider, the Fed has spent about $100 billion out of $2.6 trillion in capital allocated to help mitigate the impact of the coronavirus - $2.5 trillion is a tremendous amount of dry powder.
- Lean into the US and lean into growth. Clearly, the US isn’t out of the woods yet on the coronavirus front, but we have the wherewithal and resources to take on the virus. The rest of the world probably won’t start growing until we start growing. Finally, growth equities should continue to do well in an environment marked by modest economic growth and very low interest rates.
Tagged: weekly wire, market perspectives, Tim Holland, Federal Reserve, Presidential Election, COVID-19