The shock of 2020 gives way to hope
Weekly Bond Commentary
The end of the year offers a good chance to take stock, and in a year like 2020, count our blessings.
“Coronavirus” was a word few had heard of as 2019 ended, but it reshaped 2020. Images of the tremendous dislocation caused by the virus and response to it echoed the numbing body counts from the Vietnam War and soup kitchen lines from the Great Depression. Over 20 million thrown out of work and whole industries hanging by a thread: these are things few alive today had ever seen.
The sharp, overwhelming response by Congress and the Federal Reserve cast into sharp relief the difference between 2020 and the Great Depression. Markets in free-fall and credit seizing-up pushed the Fed to implement a host of new and revived programs that restored confidence and led, not just to stabilization, but also to equity markets soaring to record highs. The V-shaped recovery in equity prices mirrored that of gross domestic product, which fell more than 31% in the second quarter before rising more than 33% in the third.
The amazing can-do human spirit pushed for, and got, a vaccine approved and into arms within a year. Americans figured out how to conduct national and local elections during a pandemic, and many companies actually thrived. Unfortunately, many also faltered, and with them, millions of jobs were lost. Congress wrangled but finally passed additional fiscal stimulus that we hope will tide people over until some sense of normalcy returns.
As the year ended, short-term interest rates remained low, under the Fed’s control, but longer-maturity rates began to move higher, responding to increasing economic activity at home and abroad.