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Week In Review


Cases of COVID-19 continued to grow outside of China.  This growth included a case in California with no clear link to an infection acquired abroad.  The WHO has elevated its assessment of the threat from COVID-19, and U.S. officials have stated that it is likely that the virus could cause significant disruptions to everyday life in the U.S.  Capital markets have continued their risk-off moves with Treasury yields hitting record lows.  Thus far, Fed and ECB officials have stated that it is premature to adjust monetary policy in response to the economic impact of the virus.

Our Take

While equity and high-yield credit prices have dropped sharply and quickly, these moves are a retreat from record levels that arguably reflected too much optimism even before the outbreak.  Interest rates are reflecting an expectation that strong monetary stimulus will be forthcoming in the next few months.  This type of monetary policy action is unlikely unless incoming data indicate a sustained and significant downturn in economic activity.

Personal Income and Spending

January personal income grew by 0.6%.  Personal spending increased 0.2%.

Our Take

Personal income growth was better than expected in January while spending disappointed slightly.  Solid income gains often portend future economic growth as consumers have more money to spend.  Recently, it appears that these income gains are being saved rather than spent.  The likelihood of future gains in income and spending are as uncertain as the effects of COVID-19 on world economies.


New Jersey Governor Phil Murphy released his fiscal 2021 budget proposal.  The $40.9 billion budget includes an increase in spending and tax increases on incomes over $1 million.  Governor Murphy’s proposal calls for additional spending on education, transit and pensions.

Our Take

Governor Murphy has laid the groundwork for the 2021 fiscal year.  The proposed pension contribution would help close the pension system’s funding gap.  The plan calls for an increase from $4 billion to a record $4.6 billion.  Murphy had called for an increase in tax rates for high earners in his previous two budget proposals; however, New Jersey lawmakers have not agreed.