GDP Drop | Recovery Tracker | Wawa goes Beyond Meat

U.S. Economy Shrinks at Record 32.9% Pace in Second Quarter: Gross domestic product shrank 9.5% in the second quarter from the first, a drop that equals an annualized pace of 32.9%, the Commerce Department’s initial estimate showed on Thursday. That is the steepest annualized decline in quarterly records dating back to 1947, and compares with analyst estimates for a 34.5% contraction. Personal spending, which makes up about two-thirds of GDP, slumped an annualized 34.6% (also the most on record).

“We already know that activity rebounded strongly in May and June, setting the stage for a strong rise in GDP in the third quarter,” Andrew Hunter, senior U.S. economist at Capital Economics, said in a note. “Nevertheless, with the more recent resurgence in virus cases starting to weigh on the economy in July, a continued ‘V-shaped’ recovery is unlikely.”

Oxford Economic Recovery Tracker: After a rapid first phase of recovery, the economy entered the second rehabilitation phase with much less momentum and a dire need for further fiscal support. As Federal Reserve Chair Jerome Powell stressed at the FOMC press conference, policymakers should prioritize addressing the mismanaged health crisis and provide fiscal aid to the most vulnerable segments of the economy.

Our Recovery Tracker rebounded slightly in the week ended July 17 (rising 0.6ppts to 76.9). While the small weekly gain is no doubt encouraging, demand and employment—key pillars to this recovery—are showing some worrisome fissures just as Congress is debating (and delaying) additional fiscal aid.

Senate Finally Proposes Details on Potential 2nd Stimulus: The HEALS Act (Health, Economic Assistance, Liability Protection, and Schools) was proposed Monday by the Senate. This trillion-dollar package includes $200 per week for unemployment ($600 before), another $1,200 stimulus payment following the same round-one criteria, and the $500 per dependent benefit (with no age cap).

This long-awaited second stimulus now must be reconciled with the House’s HEROES Act, from all the way back in May. This House proposal is about three times larger in size. It keeps the $600 weekly unemployment benefit and includes the stimulus as before. The bill places emphasis on hazard pay for essential workers and monies to help meet the looming eviction crisis and assistance for student loan debt, among other details. Negotiations are expected to extend well into August and take weeks, if not months, to process benefits.

Plant-Based Food War Moves to Wawa Battlefield: The plant-based food wars are heating up this summer, but it looks as if Beyond Meat (BYND) will fire the last shot, for now.

Friday, Beyond Meat disclosed a new plant-based sandwich dubbed the Sizzli has gone live in 650 Wawa stores, spanning Pennsylvania, New Jersey, Delaware, Maryland, Virginia, and Washington, D.C. Another 220 Wawa stores in Florida will get the sandwich August 10.

A few of us at Compass Ion Advisors are excited by this news. Others not so much. Several of us are on the fence over plant-based food. If you try a Sizzli, let us know the verdict!

The Week on Wall Street: Last week all indices were up. The Standard & Poor’s 500 rose 1.75%. The MSCI ACWI Index, a broad measure of equity-market performance throughout the world, 0.75%, and the Barclays Global Bond Index at 0.93%.

Planning Corner: Reevaluate Lifestyle Spending amidst C-19: We have noticed a trend the last few months in many of our planning meetings with clients. Many have used this lockdown period to reconsider how they spend. We raised this subject in previous market updates, but a potential silver lining of the COVID-19 era is the chance to reevaluate how we spend our discretionary dollars and to form better habits. If you relate to this sentiment and want to establish some new habits, we would be happy to assist you. We have lots of practical tips, tools, and time to help you implement whatever you conclude.

A recent article from Financial Advisor Magazine examines this opportunity. A key excerpt:

“If behavioral economists and psychologists wanted to conduct an experiment into consumer savings and spending patterns under extreme constraints, the last three months provided a convenient laboratory. Deprived of many of their most familiar spending activities, Americans got a chance to think long and hard about the various priorities in their lives.

April’s 33% savings rate may be a statistical anomaly subject to revisions. However, professional observers like PGIM Fixed Income’s chief global economist Nathan Sheets expect the rate to remain in the double digits for the remainder of 2020. Other economists think that savings will remain at elevated levels for several years.

Time and money, in that order, are often clients’ most precious resources. As the nation gradually emerges from lockdown, advisors are counseling anxious clients, some of whom have seen their lives upended and others who are considering major changes in their lifestyles, to use the experience as one of reflection.”