The first quarter of 2020 has been quite the character builder. In the beginning of March, the coronavirus aggressively took hold of the United States. On March 20th, Kenny Rogers passed away (you know his song “The Gambler”) and the following day Governor Pritzker of Illinois implemented a Stay-at-Home order for the entire state. News of the virus and the reaction by local governments hit the market hard and fast.
My process for writing this letter is to sift through notes I’ve kept throughout the quarter and narrow down to topics most relevant to you and your portfolio. There is an abundance of news and data that gets reported- much of it is noise. The last few quarters the hot topics were tariffs, trade deals, geopolitical events, no to low unemployment, will corporate earnings continue to be fabulous? Volatility is a common talking point, especially during an election year.
In January my notes flashed a yellow warning light about a virus coming out of China – but that was running in the background. The virus was expected to spread to Europe and perhaps the USA. It appeared that the effect on the market would be like SARS and the Swine Flu with the initial information we had. We did not expect the rapid spread and virtual lockdown we have today. As of the last day of the quarter the market was down over 21%. Most of our portfolios outperformed the general markets, but that doesn’t help when you see your statements in the red.
The US Government acted fast and announced relief packages to individuals and businesses. Expect Congress to pass more legislation that will provide additional assistance in the months ahead. The Fed and Treasury have also been working in high gear helping to soothe the markets. By reducing interest rates and injecting liquidity into the market, the losses in the financial markets have been more than halved as of this writing. The Federal Reserve has signaled that they are prepared to do even more if need be.
While the government is giving us reason to breathe a little easier, we aren’t ready to run a marathon just yet. There have been massive job losses over the past few weeks and small businesses are struggling. The lifeline extended to them from Congress is the smallest of life rafts. It will not help those who were over-extended during the good times. My immediate concern is that the processes in place will not be executed in an organized and timely manner. Many thousands of businesses have not been successful at accessing or getting their applications submitted for the relief program. Small businesses will be hit the hardest; while large companies, like those in your portfolios, will likely weather this storm. They may even pick up market share with fewer competitors.
We hope this letter provides some insight into the current economic situation. Communication is more important now than ever before, which is why over the last few weeks we’ve been sending email updates. Thank you for the positive feedback and please feel free to weigh in on topics you’d like addressed.
I hope you are healthy and safe.
Investment Advisory services offered through Moonstone Asset Management, Inc. a registered investment adviser
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.