Possible economic slowdown. The other major risk is that the improvement in jobs and spending will pause. Given the size and number of states seeing renewed outbreaks, this pause is certainly possible, and some slowdown is likely. July should demonstrate how much economic damage the secondary outbreaks are causing and how much they will slow the recovery.
Solid market trends. Despite those risks, the trends for financial markets remain favorable. The major U.S. indices all closed out June above their long-term trend lines, which historically has been a positive sign. The rise in new cases is well known and largely priced into the market. So, with investors regaining confidence and the economy continuing to improve, prospects remain solid.
Real Risks, But Prospects Remain Favorable
June was the month when the virus came back, despite the past improvement. July will be the month when we see just how bad that damage has been—and whether the secondary outbreaks will be contained without derailing the recovery. The risks are real, and some damage will be unavoidable. But with viral control measures back in place and with job growth and confidence strong, despite the medical headlines, overall prospects remain favorable.
Brad McMillan is the chief investment officer at Commonwealth Financial Networ