Investment Strategy Insights

I don’t remember a time when there was more uncertainty about the economy, equity markets, debt markets, and with interest rates, volatility, and currencies. There is no comparison!

After several tumultuous weeks, global financial markets continue to be severely impacted by coronavirus contagion. In these unprecedented times, no one can say that they have lived through market conditions quite like the ones we are currently experiencing.

It’s really bad out there in small business land as witnessed by the above chart. Unemployment has gone parabolic and there’s likely a bit more to go to potentially have 10%+ unemployment in the U.S. The rapid move from <3.5% unemployment to >10% unemployment will be the fastest in history.

We believe there will be long-lasting economic and business ramifications long after the Covid-19 pandemic is resolved. Along the way governments will be on the hook for massive amounts of stimulus dollars to keep their economies running and in global financial markets, there will be companies and sectors that benefit and those who are adversely impacted by the deadly virus.

Even though there are many unknowns, we believe there to be extremely low credit risk to many bonds that we can buy in this “once in a life-time opportunity” for the second time in my 15-year career.

Even though there are many unknowns, we believe there to be extremely low credit risk to many bonds that we can buy in this “once in a life-time opportunity” for the second time in my 15-year career.

On a very short-term basis, my panic metrics are as stretched as they ever get. At any given time, the market can rally like it has earlier this week (+8% for the S&P 500 as I type). The rubber band only stretches so far before it needs some relief.

This past decade has been a tremendous run for the S&P 500, remarkably like the path of U.S. equities in the 1990’s. When looking at the other major asset classes, however, the 2010’s have not been nearly as exciting.