First, apologies for the lack of updates during this quickly developing crisis. As you may have deduced from the number of trade confirmations you have received lately, we have been at battle stations, moving money and getting to higher ground. The selling is almost all behind us, and we have some more time to look ahead and formulate what to do next.
The coronavirus crisis is like no other we have faced, and it’s too soon to understand the ultimate toll on society—health, psychological, or economic. The fact is we have never seen such a sudden stop to the global economy. Just as even the healthiest of humans can’t survive after a few minutes without oxygen, many healthy businesses (and the jobs with them) can’t survive with a temporary absence of revenue and credit.
The window to contain the virus seems all but closed, and governments globally and locally have some difficult decisions to make. To focus on health and “bending the curve” requires even more economic pain and a hope that people will ultimately comply with measures critical to stop the spread—an easier task in Asian countries than in the rambunctious U.S.
How bad the crisis gets could ultimately be contingent on critical developments in 1) the spread of the disease (i.e. how compliant will people be about handwashing, social distancing, etc.); 2) treatment development and ultimately a vaccine; and 3) the fiscal and monetary response.
On the latter, the Federal Reserve just announced “unlimited Quantitative Easing,” where the Fed will “print” massive amounts of money to purchase debt securities of the Treasury, corporations, and municipalities. More creative monetary stimulus could still come. Meanwhile, Democrats and Republicans could soon iron out differences in what should be a historic fiscal stimulus and bailout package, perhaps by tomorrow. Loans to business and checks to households should be coming soon. How much help and how effective it will be, we don’t yet know.
Markets could rally on any positive developments here, but without a breakthrough in the fight against coronavirus itself, it would be premature to assume everything will be booming again shortly. Given the severity of the crisis, it’s unlikely the saga will trough in just a little over one month’s time. Defensiveness with investments and one’s own activities is still prudent. As always, we will remain focused on clients’ investment survival first. And we hope that we can parlay defensiveness to prudent opportunism.
More than that, we hope you are well and healthy and stay that way.