The five largest lenders in the U.S. – JPMorgan Chase, Wells Fargo, Bank of America (BAC), Citigroup (C), and U.S. Bancorp (USB) – say the financial stress caused by the pandemic could cause borrowers to default on a total of $104 billion in debt.

JPMorgan Chase, for one, is predicting the bank could have to cover $32.1 billion in bad loans. That’s nearly triple the $13.2 billion that it was predicting a year ago.

In other words, that $600 extra benefit, even for one week, counts big-time in the grand scheme of things when it leads to folks defaulting on their debts.

While a lot of stocks have recovered significantly from their March lows, banks have not. That reflects the concern for prolonged economic impact from the COVID-19 pandemic… or at least that the recovery won’t be as strong as a lot of people envisioned a few months ago.

Wells Fargo stock is down more than 50% this year, JPM is down almost 30%, and Goldman Sachs is down around 5%. And financial stocks in general remain down more than 20% for the year.


The US Economy


  • The June building permits figure was a bit softer than the market was expecting. However, the weakness was all in multi-family housing.
  • The U. Michigan Consumer Sentiment report surprised to the downside as confidence took a turn for the worse in July.
  • The downshift in sentiment was substantial.
  • The New York Fed’s national survey shows worsening expectations of earnings going forward.



  • Government cash is the reason we saw such a sharp rebound in retail sales. The federal aid is also the reason spending by lower-income consumers recovered faster. The federal assistance to state and local governments created a substantial boost to the GDP. Will the government extend the current unemployment benefits beyond July?
  • Here the US fiscal response vs. the rest of the world (% of GDP).



  • Twenty percent of the US labor force is collecting unemployment benefits.
  • This chart shows the percentage of shuttered small and medium-sized businesses across industries most impacted by the crisis.



  • Existing home sales rose sharply in June.




The markets are about to enter the seasonally “weak,” two months of the year.



15-Bullish Factors (with sarcasm)


While this list is by no means exhaustive, it does offer many of the most important assumptions currently supporting the market.

  1. Corporate managers have become so adept at their jobs that profit margins and equity valuations will remain at, or rise from current nearly unprecedented levels.
  2. Bond yields will rise as economic growth returns, which will support stock prices.
  3. The Fed will continue to expand its balance sheet and provide more liquidity.
  4. Annual fiscal deficits over $1 trillion will power economic growth with no consequences.
  5. The rising number of COVID-19 Cases, when they collide with the annual “Flu” season, will not inhibit consumers from getting back into the economy.
  6. The rising number of corporate bankruptcies is a non-event” due to the Fed.
  7. Technology companies are the best place to invest now and going forward as they can continue to grow earnings.
  8. The resurgence of the U.S./China trade war won’t have any impact on the economy or markets.
  9. Corporations, via stock buybacks, will continue to be the predominant purchaser of U.S. stocks.
  10. Liquidity flows to the financial markets are never going to stop.
  11. Central Banks can permanently prop up asset prices.
  12. Valuations don’t matter. Just the Fed.
  13. Corporations are issuing debt at cheap rates, which will be a good thing long-term.
  14. The stock market is a can’t lose situation. Buy stocks as they always go up.
  15. This time is different


COVID Update


According to Gavekal, US infections should peak by mid-August.



And fatalities will peak between late August and mid-September.



The Fed


Reserves are lower due to the latest downturn in the Fed’s balance sheet as well as further increases in the US Treasury’s cash holdings with the Federal Reserve (which drains private-sector deposits). The federal government now holds over $1.8 trillion at the Fed.






The trade-weighted US dollar index is testing decade-long uptrend support. A lower US Dollar means a higher Gold and Silver price, all other things being equal.



COVID Vaccine


The partnership between Oxford University and AstraZeneca will see another Phase III test involving 30K participants in the U.S. beginning next week, along with a parallel test of the Moderna vaccine. It would not be a surprise if more manufacturing deals are announced by companies pushing ahead with vaccine development.

This week’s upturn in initial unemployment claims comes as virus cases climb and many states reimpose business restrictions. It’s a reminder that economic disruptions will continue until something disrupts the virus. The RSM economics team argues a vaccine is the only answer, and unfortunately may not come as soon as hoped.

Key Points:

  • Reduced social and economic activity is hitting an economy that was already underutilizing its productive capacity.
  • Presently 23 vaccine candidates are in human trials and more are in development. Positive early reports are fueling overzealous expectations.
  • Healthcare industry leaders believe no vaccine will be widely available until late 2021.
  • We should not assume any vaccine will be equally safe and effective on everyone. Differentiating between patients could be a new challenge.
  • Many investors and business leaders aren’t considering a reality that doesn’t include a near-term vaccine and the resulting impaired economy.
  • Absent a vaccine, the economy can recover only by stemming the virus’s spread through social distancing, masks and increased testing, all of which have economic and social costs.

Bottom Line: Equity valuations and political statements suggest a vaccine will be available in 2020 and quickly spark an economic recovery. RSM believes risks to this outlook are both significant and not fully reflected in the markets or public sentiment.




The most profitable company in each state:



Nasdaq shares’ market value:



Warren Buffet is Having a Tough Year



World Demographics


Population aged 65 and over:



Market Data


  • Dumb Money Confidence has spiked and is above 80% for the first time since January. Most of the time when optimism gets this high, any further short-term gains get erased during subsequent pullbacks. This is one of worst spreads ever at this point of the year, which has a poor seasonal window.
  • Stocks are now entering one of their worst seasonal stretches, with seasonal peaks in the S&P 500 and Nasdaq 100 occurring now. This is one of the few times of the year when the S&P 500’s rolling two-month forward return has averaged worse than -1% since 1999.
  • Below is a look at market performance year-to-date.



  • S&P Profit margins have deteriorated.



  • The risk premium priced into VIX futures is well above the levels we saw before previous elections.



  • The top 5 stocks in the S&P 500 are holding the most weight in the index since 1979, which has helped to mask some underlying weakness in the breadth of the index. On Monday, the index rose the most ever given how many more declining than advancing stocks were in the index.
  • According to Bloomberg, the S&P 500 earnings yield is now at its lowest in over a decade.



  • Half the stocks in the S&P 500 are lagging the index by over 10%. Only 22% of the members are outperforming by more than 10%. Such divergence is highly unusual.



  • The Nasdaq 100 index hasn’t deviated this much from its 100-day moving average since 2000.





All content is the opinion of Brian J. Decker

Decker Retirement Planning Inc. is a registered investment advisor in the state of Washington. Our investment advisors may not transact business in states unless appropriately registered or excluded or exempted from such registration. We are registered as an investment advisor in WA, ID, UT, CA, NV and TX. We can provide investment advisory services in these states and other states where we are exempted from registration.