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September 11, 2020

Closing Out 2020: The Vaccine, Market Recovery and Ongoing Challenges

City National Bank's investment leaders have raised their U.S. economic growth forecast for the third quarter and full year, citing strong demand both from consumers and from businesses recovering from the coronavirus pandemic shutdown.

“The two are going to help provide a solid second half of the year for us," said Tom Galvin, chief investment officer for City National Rochdale, the bank's investment advisory organization.

City National now expects U.S. gross domestic product to grow by 15 percent to 25 percent in the third quarter, with a bias toward the upper end of that range, compared to the previous outlook for 10 percent to 12 percent growth, Galvin said during a September 9 presentation.

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Closing Out 2020

After a 32 percent second-quarter decline amid the coronavirus lockdown, GDP should register a 4 percent to 5.3 percent decline for the full year 2020, followed by 3.5 percent to 5.5 percent growth in 2021, Galvin said.

Consumers, who account for roughly two-thirds of U.S. economic activity, are driving growth in the second half of this year, while companies rebuilding inventories or expanding are contributing as well, he said.

Chart showing improvements continue in our speedometers and forecasts

Though "we see gradual continued recovery," City National Rochdale CEO Garrett D'Alessandro said, the team is "increasingly disappointed" with federal policymakers' failure to approve a robust stimulus package to keep supporting businesses and jobless Americans struggling with the ongoing pandemic.

A recovering manufacturing sector and booming existing home sales signal a generally improving economic backdrop, the Rochdale leaders said.

Consumer net worth has hit a record $123 trillion, D'Alessandro noted. "That is the source of future spending across the U.S."

Nonetheless, they cited areas of weakness, risk and uncertainty arising from the public health crisis, including 13.6 million unemployed workers, continued troubles for the airline and travel industries and conflicting fatality projections for the rest of 2020.

Ongoing Challenges, Including Unemployment

While employment is gaining ground overall, more of the layoffs forced by the pandemic lockdown are turning from temporary into permanent job losses as businesses close, cut investments or file for bankruptcy.

“The number of permanent job losses continues to climb" tempering the improving employment picture, Galvin said, citing the Bureau of Labor Statistics.

Chart showing employment improvements tempered by rise in permanent

Roughly half of the 22.1 million jobs lost during the pandemic have returned, although prolonged shutdowns have slowed gains in July and August, he said, also citing BLS information. Galvin noted that census worker hiring boosted employment statistics last month.

Chart showing employment gains ease in late summer

Many businesses damaged in the lockdown will shut their doors permanently, Galvin said. “That's why we don't see unemployment back to pre-COVID levels for many years," he said.

The overwhelming majority of shuttered businesses have no defined plan for reopening, according to D'Alessandro.


D'Alessandro cited mixed news in the fight against coronavirus, including a “stunningly negative" projection from a leading forecasting service, the Institute for Health Metrics and Evaluation, that fatalities from the disease could more than double from current levels to exceed 400,000 by year end, potentially spurred by a winter spike in influenza.

But another leading service,, forecasts declining fatalities, he noted.

“No one knows what will happen," D'Alessandro said, adding that a case spike could create hospital capacity problems.

Chart showing daily projections

Meanwhile, the Rochdale CEO cited data showing coronavirus cases, hospitalizations and fatalities declining nationally.

Chart showing national cases, hospitalizations and fatalities

More than half of U.S. states are reporting positive coronavirus test rates under 7.5 percent, putting them in the “green zone" necessary for business reopenings, while 13 recently fell into the “red zone" with positive rates at or exceeding 10 percent, D'Alessandro said, again citing

Chart showing positive test rate

Coronavirus vaccine Phase III trial results should be available later this year, with possible government approvals coming before year end, he said, citing multiple sources. A vaccine's true safety won't be clear until millions of people have received it, however, D'Alessandro noted.

Your Portfolio

Rochdale analysts also are keeping an eye on the 2020 election outlook and implications for investor portfolios and strategies from potential policy changes.

D'Alessandro cited recent polls indicating a lead for Democratic presidential candidate Joe Biden and a tightening race for control of the U.S. Senate.

“Covid-19 continues to be the most important factor driving macro positioning" in client holdings, with elections contributing to volatility, said Lindsey Cook, senior portfolio manager.

Stocks remain highly valued and investors should consider alternative strategies for better returns, D'Alessandro said.

Given high stock prices and low interest rates, City National Rochdale has been emphasizing carefully selected large-cap and high-dividend U.S. stocks, emerging market Asia equities and “opportunistic" assets including high-yield bonds, emerging market debt, collateralized loan obligations and U.S. bank loans.

Chart showing investment imperative expand your toolbox

Galvin noted that Rochdale has been “waving the yellow flag" on emerging speculative tech stocks, which he said may be starting a long overdue correction after explosive performance this year. City National, he said, steers clear of these exorbitantly valued stocks and remains focused on companies with strong fundamentals and reasonable valuations.

Active asset management is key to helping clients reach their goals, with asset allocation the most important decision, followed by individual securities, said Rachael Crane, portfolio manager.

It's also vital, she said, to manage for risk and tax consequences and minimize investors' behavioral biases that can lower returns.

Active management allows investors to adapt to a changing economic environment, Crane noted.

“What we're recommending today may be different than what we're recommending a year from now or six months from now," she said.

Rochdale has enhanced investor returns over the past five years with its portfolio weighting decisions, she noted, citing data from Factset.

Chart showing focused regional allocations can enhance returns

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 Standard and Poor’s 500 Index (S&P 500) is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. 

MSCI EAFE NR Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% free float-adjusted market capitalization in each 21 countries. Net returns in USD.

MSCI Emerging Markets Asia Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the Asian emerging markets. 

The MSCI Emerging Markets Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets countries.

Dividend & Income Blended Index is a custom blended benchmark composed of 50% Dow Jones US Select Dividend Index / 10% Alerian MLP Index / 15% MSCI US REIT Index GR / 25% BofA ML Core Fixed Rate Preferred Securities Index. 

The Bloomberg Barclays US Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index. STRIPS are excluded from the index because their inclusion would result in double-counting. 

Bloomberg Barclays U.S. Corporate High Yield Index is an unmanaged index that is comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1 (including defaulted issues), and at least 1 year to maturity. 

Bloomberg Barclays US Aggregate Bond Index

ICE BofAML High Yield US Emerging Markets Corporate Plus Index tracks the performance of US dollar denominated below investment grade emerging markets corporate debt publicly issued in the US domestic or eurobond market.

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 9, 2020 presentation, “Economic and COVID progress vaccines vs. flu season," 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.

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