July 2020 – Mid-Year Outlook: Selloff. Rebound. What’s Next?

David L. Johanson |


  • Recession update
  • Charles Schwab as custodian
  • Love is the answer

Wow, lots to cover in our July Newsletter.  The economy, Johanson Financial Advisors (JFA) update, social unrest.  Let’s start at the top.

The first half of 2020 witnessed an unprecedented shutdown of the U.S. economy.  A recession is officially here, ending 128 consecutive months of economic growth.  Time will tell how long the recession will last.  Our ability to contain COVID-19 and the worry of it spreading, will go a long way to establishing a new bull market.

The average contraction in the U.S. since 1854 is 17 months; however, more recent recessions have been shorter.  In the post-World War II era, the average recession has been 11 months.

Peak Month

Trough Month

Contraction Duration

Expansion Duration

February 1945

October 1945



November 1948

October 1949



July 1953

May 1954



August 1957

April 1958



April 1960

February 1961



December 1969

November 1970



November 1973

March 1975



January 1980

July 1980



July 1981

November 1982



July 1990

March 1991



March 2001

November 2001



December 2007

June 2009



February 2020



Average Since 1945



Average Since 1854



Source: NBER; contraction and expansion measured in month


Jerome Powell, our Federal Chair, said it best, “The extent of the downturn and the pace of the recovery remains extraordinarily uncertain and will depend in large part on our success in containing the virus.”

After an initial stock market decline of 35%, the market has surprisingly resembled a V-shaped recovery into the end of June. The broad markets are down for the year, but they experienced the best quarter in more than 20 years.  Thanks to the Fed for a massive amount of stimulus.

We will see if the V-shaped recovery continues, or if a U, or W, or a series of jagged peaks and valleys carries forward.  The shape of the recovery might depend on four issues:

  1. How quickly can people get back to work?  Is the unemployment rate receding?
  2. Are infections, hospitalizations, and deaths on the rise?  We need to contain the virus.  
  3. Is medical science giving us more hope for a vaccine?
  4. The upcoming election.  We are all uneasy.

The good news is the U.S. economy is starting to accelerate as states slowly reopen businesses.  Communities are attempting to become more normalized.  We are not out of the woods yet, as new Coronavirus cases are rising.  We hope and pray we do not have to close businesses again due to incontrollable infection rates.  The U.S. Treasury Secretary, Steven Mnuchin, stated, “We’ve learned that if you shut down the economy, you are going to create more damage.”

We need consumers working, thriving, and feeling comfortable spending.  U.S. Consumer spending is roughly two-thirds of our economy.  In 2019, the U.S. Consumer spent approximately 13 trillion.  That is nearly as big as the entire Chinese economy (14 trillion).  We have more spending power than any country in the world.  It is important not to underestimate the U.S. Consumer.

Charles Schwab’s Acquisition of TD Ameritrade

We wanted to inform you about two significant milestones as part of TD Ameritrade's pending acquisition by Charles Schwab.

The Department of Justice (DOJ) has closed its review of the transaction and Schwab/TD Ameritrade are approved to move forward towards a deal close.  As this milestone was met, Schwab and TD Ameritrade are engaging in more meaningful conversations about how to bring the two goliath companies together.

The two companies remain separated for now, so it is business as usual.  We at JFA, have custody at TD Ameritrade Institutional and at Charles Schwab, so it should not do anything meaningful to us, or to your portfolio.  If you own 100 shares of ABC stock at TD Ameritrade, you’ll own the same 100 shares at Schwab.  Nothing much changes, other than the custodian.

Everything should work out great.  We will continue to keep you informed as we have more information to share.  These big deals take time.  We anticipate talking more about it later this year or in early 2021.

Social Unrest in America

As we have observed the protests against police brutality over the last few weeks, we share in the outrage that brought us to this point.  We stand with those peacefully protesting for change.  There is absolutely no excuse for racism of any kind, as we believe we are all brothers and sisters.

We are proud and fortunate to have clients and friends all over the country.  Learning from a wide variety of cultures, experiences, accents, colors, and points of view is very important to our business.  For this reason, it is difficult to understand why people fight the perspective of “different”, instead of embracing it.

In the end, hatred will not root out hatred.  In the lyrics of England Dan & John Ford Coley’s song “Love is the Answer” -

Light of the world, shine on me

Love is the answer

Shine on us all, set us free

Love is the answer

Concluding Thoughts

Please don’t forget the July 15th deadline for 2019 tax return filings, payments, and Q1/Q2 estimated tax payments.  This date will not be further postponed, and any payments made after July 15th will be considered late.

We continue to hope that you, your family, and friends are doing well and staying safe.  Now more than ever, we remain focused on providing you with the expertise and resources you need to build and maintain wealth.

You can count on us to stand ready to support you as we navigate these unprecedented times.  These are the Dog Days of Summer.  It feels like the last few months have lasted forever, but we will get through this together.