Today's trading continued last weeks light gains, with the Dow Jones Industrial Average closing above 24,000 for the second time since March 10th. Volatility in WTI oil continued apace, as the price of June WTI contracts declined more than 20%, but Brent Crude closed down 6.3%. 

Big Week of Economic Announcements Ahead

There are two big macro events in the schedule for this Wednesday: Federal Open Market Committee (FOMC) meeting, and the US Bureau of Economic Analysis's GDP announcement. 

At the FOMC meeting, we'll get to see how the world's most important monetary policy body is understanding the current crisis and projecting its recovery. Nobody is projecting a change in interest rates to be announced, but hearing how Jerome Powell talks about the crisis will give us a lot of clues about the FOMC's policy going forward. Of particular interest is inflation, which obviously on everyone's mind with the money printer running at 110% and severely reduced economic activity.

A GDP announcement won't be a major market inflection point, since the market has already priced in terrible Q1 GDP numbers, but will be extremely good reading. How bad COVID-19 has affected economic activity will help investors get a sense of how to project forward earnings and the likely path beyond this crisis.

Our Outlook

Significant damage has been done, and how quickly the economy and equity markets recover will tell us how well this pandemic has been managed. On one hand, this recession was faster and deeper than any we've previously experienced, and shocks to unemployment will drag on the recovery. On the other hand, generous bridge programs and aggressive monetary policy have tended to the consumer and credit markets more carefully than we've ever seen before.

It will be interesting to follow the experience of other countries as they begin to tentatively reopen for business. Italy, France, Spain, and other European nations have announced plans to tentatively reopen, as their rates of new infections and deaths have stabilized. Whether they're able to do that safely, without incurring further spikes and re-implementing control measures, will be instructive of what Canadians can expect once controls start being relaxed here. 

We continue to advise our clients to maintain a comfortable cash position and consider investing in only the largest, most established names. Doing so likely precludes earning optimal returns, although large-cap dividend paying companies have performed well in the recovery so far, but reduces risk in a valuable way. We don't believe there's much sense in getting fancy right now and chasing huge returns.

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