Market Bulletin: Resilience (Audio Included)

RESILIENCE

Some of us are old enough to remember a song by the Grateful Dead, What a Long Strange Trip It’s Been. That is how the last few weeks have certainly felt. I was talking with my soon to be 95 year old mom recently and she said, “These toilet paper hoarders are putting the pan-ic in pandemic.” The Force, and the sense of humor are strong with that one. Her calmness comes from experience. The experience of having lived through The Great Depression and wars, good and bad times, and seeing that American resilience helps us survive and ultimately thrive. Our country has endured many challenges and we will get through this one as well.

A lot has happened this past week! We continue to monitor the Covid-19 situation as we close out the first quarter of the year. Last week started with the Federal Reserve agreeing to unlimited Quantitative Easing, that makes it easier for banks and financial institutions to get access to cash. The Fed also expanded that program to foreign central banks because the United States and the dollar continue to be a haven for investors globally. Last Wednesday, the Senate came to agreement on a nearly two trillion-dollar stimulus package. This would include loans to small and medium sized businesses, expanded unemployment benefits, and direct checks to Americans to help them through this period of uncertainty. Last Thursday we saw a record 3.28 million workers had applied for unemployment benefits, which was nearly three times what economists were expecting but we continued to see a rise in the markets. It seems markets had priced in this bad news and expect the stimulus package to help ease much of the concerns around those unemployment figures. Finally, last Friday President Trump signed the stimulus bill into law, which helped propel the Dow Jones Industrial Average into having its best week since 1938. Developments this week include even more unemployment claims as layoffs spread and a possible agreement between Saudi Arabia and Russia to stabilize oil prices.

The past month has been filled with sharp ups and downs in the market. We have seen the initial panic selling starting to settle but it is reasonable to expect volatility to continue for a while longer. As more economic data starts to come in about the actual impact of Americans sheltering in place on the economy, we would not be surprised to see some investors selling, but the astute ones will be looking for buying opportunities.

At Capital Group, the investment management firm that oversees more assets for us than any other, every single analyst covering the healthcare sector has a medical background, and is either a PHD or an MD. Capital Group hired them for their expertise, and trained them how to use that knowledge to become successful financial analysts. These individuals have actual insights into the viability of potential vaccines or procedures that could improve the lives of people not just through this crisis but for generations to come. That is just one example of the quality we look for in the money managers we work with. Your investment managers are currently positioning you for success when the markets eventually recover. They are looking for companies with resiliency not just efficiency. Some companies took on too much debt over the last decade of low interest rates, which will present challenges for them in this new environment, while others, built resilient operations that can continue to function for 12 to 18 months without opening their doors. Knowing which companies fall into that category is the result of extensive research, which active managers bring to the table for investors. The economy is ever changing, businesses are either successful or fail in the best of times, events like this allow the cream to rise to the top much faster.

Last year, we begin an aggressive overhaul of our office technology. Our main objective was to provide more efficient processes for us and better reporting and forecasting for you. Little did we know that these new capabilities would become vital for us as we were suddenly faced with the reality of needing to work remotely. After a quick scramble to add some additional laptops for staffers, we were ready to work from home. Like many Americans, we have had our share of glitches and comedy, with our dogs joining Zoom meetings or the joyful noise of babies playing in the next room, but overall, things are functioning well. Currently we are working on producing quarter end reports. We are having some delays in receiving all the data, but we expect to have the reports out within a week.

I’m going to close by discussing a question I’ve been asked many times in the last few weeks-- “So Cilla, have you sold out of your investments and gone to cash?” The answer is no, not for myself, or for my family. I remain invested as I always have, and continue to buy more shares of the funds I own.

We will get through this. As you continue to shelter in place please do not hesitate to give us a call with any questions, concerns or if you would just like to hear a friendly voice.