First and foremost, we have profound admiration for first responders, those in the medical community and countless other essential workers for their selflessness throughout this pandemic. We also hope this newsletter finds everyone doing as well as can be expected during these unprecedented times. 

The Coronavirus (COVID-19) went from epidemic to pandemic status in short order. The initial phase of management mandated closure of non-essential businesses and social distancing to slow community spread of the virus. An unfortunate side effect of slowing the spread has been to prolong the crisis, referred to as flattening the curve, further stressing families and small businesses. Several existing drugs have been given emergency use authorization to treat symptoms⁰¹ of severe COVID-19 patients. Numerous other drugs are in clinical trials to hopefully provide time while conducting efficacy testing of vaccines.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on Friday March 27^th. The shelter-in-place restriction essentially put the US economy into an equivalent of a medically induced coma with the CARES Act⁰² being life support⁰³. The CARES Act is 2 Trillion-dollar emergency stimulus legislation providing immediate relief to families, small businesses and essential sectors during the shelter-in-place mandate. A 2^nd relief bill has been approved providing additional relief for small businesses, hospitals and for more COVID-19 testing.

Fortunately, our domestic financial system was in much better shape before this economic downturn than it was prior to the 2008 downturn. Central banks around the world are flooding the markets with liquidity⁰⁴ to support their respective economies and stave off a prolonged steep recession⁰⁵. The FED seems willing to backstop our economy and financial system⁰⁶ with low interest rates and provide liquidity however needed and act forcefully to enable economic recovery. However, solvency issues must be addressed with fiscal stimulus⁰⁷ like the CARES Act.

COVID-19 brought the longest Bull market in history to an abrupt end⁰⁸. The S&P 500⁰⁹ cascaded lower for the fastest 30% decline¹⁰ in history caused by indiscriminate selling exacerbated by Margins Calls¹¹. Investor sentiment quickly swung from exuberance to pessimism causing pendulumlike market swings between over-bought and over-sold. The precipitous drop has been followed by a “short covering” rally from the March bottom¹². Where the market goes from here depends on corporate earnings¹³  and speed of economic recovery.

Just because the market is down doesn't necessarily make it cheap. Market valuation depends on future corporate earnings, which are uncertain because of global supply chain disruption¹⁴ and consumer confidence¹⁵. Many corporations may cut or suspend dividends¹⁶ and share buybacks to preserve cash. With companies possibly given a pass on earnings this quarter by pundits, some may use this as an opportunity to do additional write-offs.

Online commerce has become more prevalent as a result of shelter-in-place, which benefits some companies, such as Amazon and package delivery companies, while hurting others. Surprisingly, the transition to a virtual workplace has gone smoothly. Therefore, CEOs may evaluate the benefitsanddrawbacks of employees working remotely. A virtual workplace requiring less commercial office space is a detriment to commercial real estate but beneficial to telecommunication and companies offering virtual meeting and video conferencing software!

With unemployment¹⁷ levels approaching 20%, the effects of this pandemic may likely last several quarters with unemployment rates remaining stubbornly high according to some pundits. However, because this began during a period of economic growth, the swift and decisive action by the FED, along with the passage of the CARES Act will hopefully limit this to a short recession¹⁸. An article titled “Courage! We have been here before”¹⁹, provides an excellent historic perspective of past crises effects on the market. The market’s ability to recover from past historic events should provide some solace.

This too shall pass²⁰, albeit somewhat painfully with this economic downturn being referred to as TheGreat Lockdown²¹. Given many K-12 schools are closed for the remainder of this school year, child care may be an issue as parents return to work. An undesirable side effect of this pandemic may likely be larger deficits at all levels of government, which DO matter and are NOT good for our country over the long haul. Ignoring deficits for now, the immediate challenge is restarting economic activity without causing a 2^nd wave of the COVID-19 virus.

Most importantly, treat this pandemic seriously and practice social distancing for safety! For anyone not needing income from Required Minimum Distributions (RMDs), the CARES Act allows RMDs to be suspended for the calendar year 2020. Given the many on-going uncertainties, investors may consider rebalancing²² while the market is down and/or cautiously dollar cost averaging into this market. Lastly, take time to make informed decisions in accordance with your short-term needs and long-term plan.

If you have any concerns because of market volatility and the corresponding correction, a member of the Iron Belt Partners team will gladly discuss any concerns with you. Our contact information is:

Lindsay M. Turchetta    lturchetta@wradvisors.com        (724) 493-9473

John D. Martin              JDMartin@wradvisors.com        (412) 925-7031

Working as a team in an effort to better serve our clients!

_{This communication is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. You should consult your tax, legal, and/or financial advisor prior to making any financial decisions.  The views expressed here are those of the authors, John Martin & Lindsay Turchetta, and not necessarily those of LPL Financial. Information is based on data gathered from what are believed to be reliable sources. The opinions, and other information contained in this article are subject to change continually and without notice of any kind. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time and may not come to pass. Past performance does not guarantee future results.}

_{Investments are not guaranteed and are subject to investment risk including the possible loss of principal.}

_{The index references herein are unmanaged and cannot be directly invested into. Past performance does not guarantee future results.}

_{⁰¹ Source: “Fauci: Remdesivir study shows drug can block virus” on USAtoday.com}

_{⁰² Source: “CARES Act: What investors and small businesses need to know” on  Capitalgroup.com}

_{⁰³ Source: “Economy on life support” on talkingpointsmemo.com by Josh Marshall}

_{⁰⁴ Source: “Central Banks have flooded global markets with liquidity” on ROCHFORD-group.com}

_{⁰⁵ Source: “JP Morgan now see economy contracting by 40% in 2^nd quarter” on CNBC.com}

_{⁰⁶ Source: “FED to create emergency backstop for Commercial paper” on AmericanBanker.com by Hannah Lang}

_{⁰⁷ Source: “Liquidity vs. Solvency = Fed vs. Fiscal Stimulus” on MorganStanley.com by Jim Caron}

_{⁰⁸ Source: “11-year Bull Market finally ends” on WallSt.com by Lee Jackson}

_{⁰⁹TheS&P 500 is an unmanaged index that cannot be directly invested into. Past performance does not guarantee future results.}

_{¹⁰ Source: “This was the fastest 30% sell-off ever” on cnbc.com by You Li}

_{¹¹ Source: “Margin Call could worsen Coronavirus sell” on Barrons.com by Al Root}

_{¹² Source: “Strong Short Cover Rally” on MoneyShow.com by Al Brooks}

_{¹³ Source: “The battle lines are clear; earnings will determine next market move” on realmoney.thestreet.com  by James Deporre}

_{¹⁴ Source: “How Coronavirus could impact global supply chain” on hrb.org by Parrie Haren and David Simchi-Levi}

_{¹⁵ Source: “Consume confidence suffers record drop in April” on MarketWatch.com  by Jeffry Bartash}

_{¹⁶ Source: “Dividend cuts are inevitable” on Barrons.com by Lawrence Strauss}

_{¹⁷ Source: “1 in 5 American Workers has filed for unemployment benefits” on CNN.com by Anneken Tappe}

_{¹⁸ Source: “Preparing for the next recession: 9 things you need to know” on capitlgroup.com}

_{¹⁹ Source: “Courage! We have been here before” on Capitlgroup.com by Martin Romo and Jim Fullerton}

_{²⁰ Source: “This too shall pass: Timeless advice when the going gets tough” by Edward Fitzgerald a 19^thcenturyEnglish poet}

_{²¹ Source: “The Great Lockdown: Worst economic Downturn since the Great Depression” on IMF.org by Gita Gopinath}

_{²² Rebalancing, diversification and asset allocation strategies can help manage risk within your portfolio but do not guarantee profits or protect against loss in declining markets. Also, rebalancing may have fees and tax consequences so please consult with a tax and financial advisor prior to making financial decisions. There is no assurance that any investment strategy will be successful.}