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The Week Ending | May 1, 2020

As you know, education plays a major role in my family as my wife Katie is the Assistant Principal at a Pre-K-8th grade elementary school. Recently, Katie oversaw the development of the online curriculum for the school. Teaching kindergarteners versus eighth graders online is very different, yet her school was able to get the students, parents and teachers all on the same page. It has been challenging, but through hard work by everyone involved, students are learning, and parents are happy.
Growing up, we all had our favorite teacher. For various reasons, there seems to be one teacher we can remember to this day. As I have shared, I was a competitive swimmer from age five until graduating from college. What you may not know, is my swimming career was nearly cut short before it even really began. One morning I woke up with the worst headache imaginable. If you have migraines, it was like a migraine, but five times worse. This headache stayed with me for approximately six months causing me to miss school and swim practice. My life pretty much consisted of sleeping and medical tests. As a parent myself, I can only imagine how scared my parents were.

Why I tell this story, is I was in the fifth grade at the time and my teacher was incredibly caring and worried about me. If I attended school and started feeling sick, she would do everything she could to try and comfort me. Additionally, she wanted to make sure I did not fall behind in school, so she helped me with my assignments and took the time to explain concepts to me. Twenty-five years later, I still remember her kindness and appreciate all she did.

Who was your favorite teacher and why did they have an impact on your life?

As Paul Harvey would say (yes, I remember my Dad listening to him), “now for the rest of the story”. As for what caused my illness, my brain was attacked by a virus causing not only my brain to swell up, but my body to lose a significant amount of muscle. Around the same time, two other swimmers also saw significant illnesses with one having similar brain swelling and the other having heart issues. Doctors concluded the three of us had ingested a foreign animal substance while swimming which then attacked each of our bodies.

Relating our most current week, to education, you probably remember either getting your report card or reviewing your children’s report cards. While each class was different, one usually had a pretty good idea of what their report card grade could potentially be. For example, you probably were not going to open the report card to see an ‘F’ when you knew you were going into finals with an ‘A’. The same as an ‘F’ did not magically become an ‘A’. Report cards are tools educators use to measure the progress of a student.

Companies also receive report cards, but they are known by another name, earnings reports. Through the end of the week approximately 292 companies within the S&P 500 have reporting earnings. Rather than ‘As and Bs’, earnings are the amount of profit a company produces during a specific time period. The most recent company earnings are the results of the first three months of the year and are starting to show the effects of the COVID-19. While we need to wait for all companies to report, we are seeing a year-over-year decline for many companies. The next quarter of earnings reports, released in approximately three months, should give us a much clearer picture of how companies were affected by COVID-19. One piece of information usually provided by many companies in the past but is now not being given, is their guidance. Guidance is a company providing an estimate of their future earnings. By removing guidance, companies are saying they really have no idea what future earnings will look like because there is so much unknown about the effects of COVID-19 on the economy. We will continue to follow the results from earnings season and will share additional information as it becomes available.

Moving on to the topic of the markets, as measured by the S&P 500, the market was down approximately .02% this week. For the month of April, the S&P 500 increased by approximately 12.7% for its best monthly performance since January 1987.

Entering May, you may have heard the term ‘sell in May and go away’. Historically, the next six months have been the worst performers of the year with an average increase of 1.5% during this time. Additionally, the S&P 500 has increased approximately 30% since the March lows, meaning a pullback from current levels would not be unexpected. With a combination of the run up and the effects of COVID-19 there is potential for downward pressure. Recent economic news of over 30 million unemployed, will certainly have an effect and could be another catalyst for short term volatility. However, due to decisions by the Federal Reserve along with passed legislation, long term effects to the nation and economy can hopefully be curtailed.

With parts of the country slowly starting to reopen, please stay safe and healthy.


Chris Zeches, CFP®
Managing Partner