Over the prior weeks, I have noticed I am listening to more music throughout the day. Be it while working, cooking, or relaxing at home, music is always playing. Thanks to technology I can have tens of thousands of songs on my phone, be them saved or streamed. All these songs are in my pocket ready to play at any time. From the phonograph to the jukebox, followed by records, eight-track, tapes, CDs and mp3, how we consume music is constantly changing.
While I do have the ability to listen to any group or song I want, 99% of the time we are listening to The Beatles. Francis is a huge Beatles fan and his favorite Beatle is Ringo. Francis knows all the members, the month of their birthdays as well as who is still alive and singing. Trying to get a three-year-old to concentrate on much of anything can be tough, however if we bring up The Beatles, Francis is all in. Not only does he know all about the group information, he is also singing the songs. Every night he falls asleep listening to The Beatles and then wakes up singing new songs. Thank goodness he has Katie’s singing skills as she is a classically trained singer and me, I can’t carry a tune.
Francis and my favorite group is The Beatles, who is your favorite group or performer?
How we listen to music has certainly changed, but so as how we communicate, especially over the prior weeks. How are you communicating with your family? Are you using Facetime or Zoom? If not and you want to learn, I would be more than happy to help walk you through the process. Just give me a call.
The beginning of the week was dominated by oil. On Monday, April 20, the price for West Texas Intermediate (WTI) closed at -$37.63. For the first time in history, oil closed negative. While this could be shocking to the casual observer and make people wonder if sellers had to pay buyers to take oil from then, it was merely the price of a futures contract. As a common financial instrument, a futures contract is an agreement to buy or sell something at a predetermined price at a specified time in the future, with the two parties being unknown. As was the case Monday, this contract was for delivery of oil in May at a particular price. The nearest futures contract in date is often used as a proxy for the price of oil since it trades regularly and usually tracks the price of oil well. On Monday, quirks in the futures market created an artificial price that, while historic and capturing the extreme stress we are seeing in the oil market, was not quite the same as the actual price of oil.
The combination of an expiring contract, plummeting oil demand, little available storage and very light volume all created the historic day. But that was for futures contracts for delivery in May. Later delivery dates were still above $20 / barrel on Monday. But even these prices represent tough times for oil producers and oil producing regions. Monday’s price anomaly is another example of how efforts to contain the COVID-19 pandemic, even if necessary, are creating unprecedented shocks in the economy and financial markets. The supply of oil is still increasing while the demand has decreased significantly. Depending upon the source, it is believed the world was using approximately 100 million barrels of oil per day at the beginning of 2020. Recent statistics are showing use of anywhere between 70-75 million barrels per day. A significant decrease, showing the change in how the world is living and ultimately affecting the price of oil. I am sure you have seen the effects of the oil market when you last went to fill up your car with gas.
Moving on to the topic of the markets, as measured by the S&P 500, the market was down approximately 1.3% this week. With the S&P 500 down slightly on the week, a streak of two positive weeks was snapped.
The response from the economy and stock market, however, has shown a disconnect. Tragically, 22 million people have filed for unemployment in the past four weeks, nearly wiping out all the jobs created during the record 10-year economic expansion. Historic drops in consumer confidence, retail sales, industrial production, oil prices, and housing starts have shown how quickly our economy has gone from solid growth to virtually stopping in its tracks. Yet, stocks have been soaring the past few weeks. Remember, stocks tend to weaken before the economy, and they tend to lead before the economy turns around. Stocks see light at the end of the tunnel before the economy feels it, and the big move recently may be a sign the economy could turn around later this year.
Small businesses have been impacted the most by the economic crisis, and the government and Federal Reserve actions to bridge the gap to better times are unprecedented. The combined stimulus from fiscal and monetary policy is more than 20% of the value of the entire US economy, as measured by gross domestic product, and was designed to mitigate the economic hardships. The hurried roll out of the small business loan program was not perfect, but it is helping those businesses. Fortunately, Congress passed additional legislation to help small businesses in need.
With more people deciding to wear masks in public, if you or your family members do not have the sewing skills to make your own cloth mask, please contact me as I know an individual producing them.
As the weekend is upon us, turn on some music and take yourself back to a simpler time. Now is a great time to share stories with others of when and what you were doing when your favorite “hit” was on the charts.
Chris
Chris Zeches, CFP®
Managing Partner