North American markets took another beating to open the month of April. The Dow Jones and S&P 500 indices fell 4.4%. Goldman Sachs and JPMorgan Chase adjusted their Gross Domestic Product projections downward for the next quarter as the economy struggles to adjust to the COVID-19 lockdowns.
The Vanguard Financials ETF (NYSE:VFH) dropped 6.19% on the same day of trading. Shares of the ETF have plunged 33% so far in 2020.
There is considerable uncertainty in the financials sector as the length of this economic shutdown is unknowable. The United States is projected to experience the peak amount of cases and fatalities in two weeks time.
However, that does not mean that the lockdowns will immediately wind down. If the U.S. follows countries like Italy and Spain and is unable to flatten the curve quickly, we may see the shutdown drag into the late summer.
The impact of a prolonged shutdown on the economy and the American worker is incalculable. JPMorgan projects that first quarter GDP will contract 10% and second quarter GDP will plunge by a stunning 25%.
Economists have projected that the multi trillion-dollar stimulus package passed in March will be unable to address the challenges conjured by this crisis. More government action will likely be warranted.
Markets have marginally rebounded from the mid-March bloodbath, but investors should not breath easy as the worst is yet to come with the economy nearly ground to a halt.
