Dear Clients and Friends:

It continues to be an interesting time in history. During these days of self-isolation, social distancing and economic shut down, we have been reminded of the importance of relationships. Relationships are what link us together. On behalf of the team here at Gallacher Capital, we would like to thank you for the relationships we share. It has been a privilege to work diligently with so many of our clients to support and strengthen these relationships during these uncertain times.

Many of you have reached out with questions about your portfolio, and our economic outlook. To you we say thanks for your continued trust and confidence in us as we strive to build portfolios to meet your goals. We continue to be tactical in our portfolios as opportunities arise. As many of you may already be aware, we are cautiously optimistic and are taking steps in everyone’s portfolio to mitigate risks should the recovery take longer than expected.

Given the nature of this pandemic, we have had several inquiries regarding estate and succession planning. Over the last several weeks we have worked with many of you to coordinate wills and trusts and ensure your estate plans are up to date. Thank you to those that have reached out regarding these important matters. Should you have questions regarding your estate or succession plans, we are happy to assist.

The economic struggles in our country are among the worst we have ever seen. In April, a record 20 million people lost their jobs, and over 40 million people have filed for unemployment since the COVID-19 pandemic struck in mid-March. Record drops in consumer confidence, manufacturing, and spending are all adding to the immediate economic fallout. Specific industries and companies have been devastated, with names like J. Crew, Neiman Marcus, and Hertz filing for bankruptcy.

Clothing sales are down 89%, furniture sales down 66%, and restaurant sales down 49% from this time last year, according to the United States Census Bureau. While these are staggering numbers, it is important to remember they are backward-looking and not surprising given the stay-at-home orders that have been in place.

In contrast, real-time economic data points such as public transportation, traveler data from the Transportation Security Administration, fuel sales, railroad traffic, and federal tax withholding are all showing improvement as the economy begins to re-open. Furthermore, a recent survey of small businesses indicate they are as optimistic about the next six months as they have been in 18 months, suggesting the worst may be behind us, and a growing demand for their products and services could be brewing.

More testing for COVID-19 is needed to help identify infected people and to stop the virus from spreading. As testing has soared, the number of positive COVID-19 results as a percentage of total tests has trended lower, and that percentage consistently has been beneath 10%, according to data from the COVID Tracking Project. In addition, doctors have developed a “toolbox” of drugs to help provide patients a better chance at survival. The World Health Organization has reported “potentially positive data” in several anti-viral treatments and vaccinations. Although a vaccine could still be a year or more away, human drug trials are underway with encouraging initial results.

In the face of the devastating loss of human life and historically weak economic data, however, global markets have experienced a significant short-term rally from their lows in March. This has been fueled by optimism over stimulus from central banks and governments around the globe, along with slowing new virus cases, and hopes surrounding the re-opening of economies. Based on historical trends, stocks are likely to experience another correction over the coming months. Stock valuations are historically expensive, tensions are building between the United States and China, and we are entering the historically weak summer months—all of these are reasons to be alert.

History bears this out. All major S&P 500 bear markets in the past 60 years had a significant bounce off the market lows, followed by a correction before another surge higher. This type of choppy, volatile action is likely to persist, especially with a highly charged election that could result in several uncertain policies (regulatory, tax, trade, etc.). As mentioned in previous communication, we have positioned portfolios defensively for this environment.

This pandemic and its far-reaching impact have and will continue to affect all of us in many different ways. We take solace in the fact that we live in a day and age where we can stay connected and support one another through these challenging times. Our country has survived many trying times before, and we are starting to see glimmers of hope on both the medical and economic fronts. Times of crisis provide opportunities to reset, re-think and reaffirm your plan for moving forward.

We thank you all again for the relationships we share and the opportunities to strengthen them during this time. Your future is our priority.

Sincerely,

Gallacher Investment Committee

Disclosure:

The opinions voiced in this report are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult Gallacher prior to investing. All performance referenced is historical and is no guarantee of future results. Economic forecasts set forth may not develop as predicted. Research material prepared by LPL Financial and Gallacher.

Gallacher does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Gallacher cannot guarantee that the information herein is accurate, complete, or timely. Gallacher makes no warranties with regards to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

All information is believed to be from reliable sources; however, Gallacher makes no representation as to its completeness or accuracy.