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Getting Beyond The Virus, Poised For Recovery

Investments Risk Management

Genuine Relationships, Global Resources. That has been our tagline for nearly 20 years. No more than today has it meant so much.

We take great pride in the Genuine Relationships we build with you and our other clients. We think it is important that you don’t have to deal with a stranger in a massive call center when you need to have a real conversation about your financial well-being. Particularly when you are worried and maybe even a little scared.

Faced with a global pandemic, we are able to draw on our Global Resources. Utilizing our relationships with research firms and analysts across the globe, we are able to gain important perspectives that we can apply to your specific financial situation. In fact, just yesterday I was on the phone with an economist we partner with that is imbedded in China, where the COVID-19 induced economic struggles began.

As an independent firm, a benefit to you is that we are not beholden to homogenized research from a single corporate back office. We aren’t force fed the company line and we don’t force feed it to you. Instead, we rely on multiple independent analysts and research firms. That helps us cut through the noise and reconcile the facts. As scary as today’s investment markets are, the good news is that all research points to one thing… this is temporary.

Last week I pointed to three factors driving the volatility in the investment markets, COVID-19, falling oil prices, and the potential for a socialist presidential nominee. The latter is now completely off the table. Oil prices continue to play a role but remain of little structural concern so enjoy cheaper gas (at least for a while). COVID-19 is clearly the single biggest driver of volatility. Here’s where my Chinese phone call comes in.

Dr. Kenneth Kim is Chief Economist at Eqis Capital Management. He lives in China. His comments to me yesterday were “What you are experiencing now is what I started experiencing two months ago”. He was speaking of the surreal world of business and school closures, invisible virus hysteria, run on toilet paper (he didn’t specifically say that), unemployment, etc. It was tough. But, as he told me, China’s demand and production is resuming. Even Wuhan, the epicenter of the outbreak, is back to work. Businesses have reopened. People are on the streets. Consumers are spending. This will occur in the U.S. as well. Why?

  • Our Economic response is appropriate – reducing interest rates, delaying tax payments, providing unemployment benefits to affected workers, small business relief programs, etc.
  • Our Healthcare response is appropriate – social distancing, bending the curve, increased testing, regulatory flexibility to speed up vaccine, etc.
  • Our economy was strong coming into this crisis which will aid in the recovery

Once we pass through virus threat, we will likely be faced with a business climate that includes

  • After a spike, a return to historically low unemployment rates
  • Inflation likely remaining low
  • Continued low borrowing costs further assist business recovery
  • Promising new trade deals that were on the table before the crisis, will be after
  • Corporate earnings will be poor, but will improve as consumer spending resumes

This is solid footing for a strong recovery.

The data continues to support the position I shared with you last week. Market volatility is a reaction to short term shocks to the economy and not structural problems. The U.S. economy was healthy and growing five weeks ago and will be again once we get through this.

It is important to know that all of ideas I have shared with you here are shared, to one degree or another, by ALL the research firms we respect and rely upon. We are not an outlier in our views. I don’t have a crystal ball and I wouldn’t dare tell you what to expect on a specific day in the future. But all indications are that this temporary, self-induced recession, much like a self-induced coma which allows a person time to heal, will soon lift and we will see a rapid recovery. We believe it will be measured in months, not years.

In the meantime, we continue to monitor and will adjust as needed. We remain confident in all portfolios and their positioning for the future.

As always, we are available to you at any time as part of our commitment to Genuine Relationships, Global Resources. Your trust and confidence are of great value to all of us here.