Office worker wearing mask at desk

September 18, 2020

Learning to Live with COVID in 2020

As we approach the busy year-end season, please note these weekly presentations will be on hiatus for the next few weeks so our analysts can devote time to additional research. Our webinars will resume every other week, beginning on Oct. 21st. We look forward to presenting again at that time and will send you a reminder beforehand.

U.S. economic activity continued to pick up this week, albeit more slowly, as new coronavirus cases, hospitalizations and fatalities trend downward, according to City National Bank's investment leaders.

"Economic fundamentals continue to improve," boosted by growing consumer spending, although high unemployment and the lack of a new government stimulus package to support businesses and jobless workers "will be a further drag on the pace of that recovery," said Ben Goetsch, senior analyst at City National Rochdale, the bank's investment advisory organization.

Consumers also remain concerned about contracting the virus, muting their outlook, Rochdale analysts noted during the team's meeting on Sept. 16.

Keep reading for your weekly market update.

Thank you for subscribing!
Error. This is not a valid email address. Please try again.
Error. Please make sure all fields are properly filled out and try again.
Subscribe to Our Newsletter

Coronavirus Trends

Coronavirus trends continue to improve - with new cases decreasing in 48 of the 50 states - and hospitalizations and fatalities declining nationally, Goetsch said, citing data from, the COVID Tracking Project and the Institute for Health Metrics and Evaluation.

Only two states were in the "red zone," with increasing cases, as of Sept. 11, he said.

Chart showing national cases, hospitalizations and fatalities

"We expect this down trend to continue for the next several weeks" and for sentiment to gradually improve, Goetsch said.

Mortality per hospitalization is much lower than earlier in the outbreak, likely because treatments have advanced and hospitals are better prepared, he said.

Chart showing improved hospital treatments have had an impact

Consumer Sentiment

While business confidence is strengthening and more are reopening, consumer confidence remains low, likely hampered by Washington's inability so far to approve a strong follow-up stimulus package and by individuals' concern over catching the lethal virus, Goetsch said.

Senior portfolio manager Lindsey Cook, citing J.P. Morgan data, noted that credit and debit card spending has picked up since mid-August after a pause during the summer, which has been spurred by declines in new cases, business reopenings and back-to-school purchases.

Chart showing spending pickup up again after summer pause

Spending patterns continue to reflect social distancing behavior, with stay-at-home goods almost back to normal and virus-sensitive businesses like hotels, restaurants, entertainment and recreation continuing to struggle, said Cook, again citing J.P. Morgan data.

Chart showing spending patterns still reflect social distancing

Consumers aren't back to normal behavior, with many concerned about visiting doctors, dentists and salons, she noted.

Data from Apple and the Transportation Security Administration shows that Americans continue to avoid mass transit as well, preferring to work from home to avoid the virus and to walk or drive when they need to travel, according to Cook.

It may take years for air travel to return to normal, and City National Rochdale is limiting investments in travel and leisure, she said.

Chart showing Americans still avoiding mass transportation

Continued downward coronavirus trends may improve consumer sentiment, Goetsch said. He noted, however, that concerns over an uptick in cases during the cold weather months and flu season have generated uncertainty.

The Economy

While the labor market continues to make progress, joblessness remains high, Cook noted, citing Federal Reserve Bank of St. Louis data showing continuing unemployment claims at nearly 14 million.

“We have a long way to go, and it will take time to get back to normal levels on many of these metrics," she said.

Chart showing progress continues in labor market

The economy should get a boost from retailers rebuilding their inventories, Cook said, again citing the St. Louis Fed and noting that retailers have been unable to keep up with pent-up demand as lockdowns, business closures and supply shortages have hampered production.

Chart showing inventory rebuild should help boost near-term growth

Meanwhile, new research offers encouraging data on coronavirus immunity, including one study indicating that some patients may enjoy immunity for more than four months, and another suggesting that a significant part of the population has developed T-cells — possibly related to infections from milder coronaviruses — that attack COVID-19, according to Goetsch.

Chart showing immunity and COVID-19

Vaccine development continues to progress, with Phase III trial data expected in the coming weeks. Distribution, a massive undertaking requiring specialized equipment and coordination between federal agencies, states, pharmacies and healthcare providers, could pose issues, Goetsch noted.

Your Portfolio

In a market with high stock valuations and low interest rates, City National Rochdale remains focused on high-quality, reasonably valued U.S. and emerging-market Asia stocks, including high-dividend U.S. equities and high-yield bonds. Rochdale's analysts anticipate moderate returns on core equities in the intermediate term, Goetsch said.

High-dividend stocks have underperformed this year and offer great opportunity, noted David Abella, managing director and senior portfolio manager. Citing multiple market data sources, he noted that high-dividend equities are priced attractively compared to growth stocks and historical performance.

Chart showing high dividend stocks relatively attractive

Rochdale sees opportunity in Real Estate Investment Trusts (REITs), which have maintained their dividends during the pandemic even as their stocks were hit, Abella said. The pandemic has had varying effects on different real estate sectors, with industrial and specialty real estate faring better than offices, residential and retail, he noted.

Chart showing real estate impact varies by sector

City National investment advisors are monitoring political polls, which continue to show Democratic candidate Joe Biden leading and Senate control too close to forecast, and are talking to clients about possible portfolio moves based on potential policy changes governing gift and estate taxes.

Chart showing estate and gift tax comparison

City National Bank senior wealth planner Shilpa Mirchandani offered the example of a married couple with a $30 million estate that would be subject to a potential $2.7 million estate tax under current law.

A lower estate tax exemption could result in a $7.2 million estate tax instead, she said.

“Exemption levels today are at all-time highs, and interest rates are at all-time lows," she explained, noting that some clients are considering various gifting strategies now to take advantage of the current market and regulatory environment.

Chart showing lifetime gifting considerations

In this election season and always, City National Bank and its investment advisory organization, City National Rochdale, remain committed to delivering objective, non-partisan market analysis and investment guidance, with the goal of helping our clients make informed financial decisions.

In these turbulent times, City National encourages you to review your investment portfolio with your advisor. Contact our financial professionals today to ask questions and receive help with your wealth planning needs.

You also are encouraged to keep up-to-date with the latest economic perspectives and shifting global markets during the pandemic by signing up for City National Bank's newsletters here. Delivered biweekly, straight to your inbox.

Indices are unmanaged and one cannot invest directly in an index. Index returns do not reflect a deduction for fees or expenses.

The S&P 500 Growth Index is a market capitalization weighted index. All the stocks in the underlying parent index are allocated into value or growth. Stocks that do not have pure value or pure growth characteristics have their market caps distributed between the value & growth indices. Prior to 12/19/2005 this index represented the S&P 500/Barra Growth Index.

The Dow Jones US Select Dividend Index seeks to represent the top 100 U.S. stocks by dividend yield. The index is derived from the Dow Jones U.S. Index and generally consists of 100 dividend-paying stocks that have five-year non-negative Dividend Growth, five-year Dividend Payout Ratio of 60% or less, and three-month average daily trading volume of at least 200,000 shares.

This presentation is for general information and education only. City National makes no representations or warranties in respect of this presentation and is not responsible for the accuracy, completeness or content of information contained in this presentation. City National is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained in or from the site. The information in this presentation should not be used to obtain credit or for any other commercial purpose nor should it be construed as tax, accounting, regulatory or legal advice. Rules in the areas of law, tax and accounting are subject to change and open to varying interpretations and you should seek professional advice from your advisor. Nothing in this presentation should be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the viewer's specific investment objectives. Any financial instrument discussed in this presentation may not be suitable for the viewer. Each viewer must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this presentation and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results.

The material contains forward-looking statements regarding intent, beliefs, or current expectations which are used for informational purposes only. Readers are cautioned that such forward-looking statements are not a guarantee of future performance, involve risks and uncertainties, and actual results may differ materially from those statements as a result of various factors. The views expressed are also subject to change based on market and other conditions. Furthermore, the opinions and information presented do not involve the rendering of personalized investment, financial, legal, or tax advice. Certain information has been provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as on the date of this document and are subject to change. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results.

City National Bank provides investment management services through its wholly owned subsidiary City National Rochdale, LLC, a registered investment advisor. Content from the September 16, 2020 presentation, “Learning to live with Covid," is reprinted by permission from City National Rochdale.

City National (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this article and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

Thank you for subscribing!
Error. This is not a valid email address. Please try again.
Error. Please make sure all fields are properly filled out and try again.
Subscribe to Our Newsletter