Market Outlook · June 16, 2020

Retail's Comeback, "Zombie" Companies and the Fed Just Keeps Buying

Brent Ciliano

CFA | SVP, Chief Investment Officer

1 Retail sales in May explode!

U.S. retail sales made the biggest jump on record in May and double what was forecast, regaining more ground than expected after unprecedented drops in the prior two months as states allowed more merchants to reopen.

2 Perpetually low interest rates are giving rise to “zombie” companies

One consequence of aggressive Fed support to credit markets and long periods of low interest rates is that these actions interfere with the process of creative destruction and keeps companies alive that would otherwise have gone out of business.

3 US Census survey – how has this pandemic affected American workers?

Half of US households have experienced loss of income because of COVID-19. But the extent to which US households have lost income varies greatly from state to state.

4 Is the Fed buying corporate bonds a good thing?

After the Fed announced their intentions to support liquidity in corporate bond markets, we’ve seen nearly $42 billion flow into corporate bond ETFs. 

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