Markets have moved upwards over the last month despite deteriorating fundamentals.
Optimism around reopening and pent up demand, combined with the alternative of record low-interest rates, appears to be driving short-term equity performance, despite the reality of the situation at street level.
Irrespective of whether we get a second wave, a second peak or no further infections at all, the damage flattening the curve has done to our economy is nothing short of frightening.
In many, but not all sectors, this is just starting to play itself out.
Higher profile corporate bankruptcies are starting and will continue to emerge. And the inevitable reality of personal financial woes for those most affected starts to play out in the fall. Government subsidies cannot last forever.
The Coronavirus crisis has not hit all industries equally – anything but.
New winners will of course emerge, as they do with every recession. Professional portfolio managers will find them while fiscally responsible stable firms will remain.
We here at Schneider Insurance, as an example, are as busy as ever. People need financial guidance, particularly in a crisis. We’re fully staffed, both at the office and at home. That includes our team of paid external experts – who are helping us navigate the crisis, amongst other things.
In times of trouble, people seek the tried and true. Our clients, thankfully, continue to refer to their friends and co-workers as per the last 30 years. We’re both very grateful and humbled by that. We have been doing business as usual, adding new accounts, reviewing portfolios and (where needed) adjusting them – often over secure video conference using DocuSign.
But it’s an uneven split
For some industries, however, it’s bleak. The reality of that should come crashing down for households around the country over the next six months, irrespective of what happens to reinfection rates.
For others, three months of working remotely have served to remind us that perhaps we really didn’t need many of the things we simply took for granted in pre-virus days. So at this point, it’s still difficult to see how this is all going to fit back together again.
Sometimes Markets Get Ahead of Reality
We have stated before that ‘sometimes reality gets ahead of the markets’ and ‘sometimes markets get ahead of reality.’ The later seems to be the case currently.
Though we continue to question. To look for other clues and examples that might suggest that we are perhaps incorrect in our view. That the next couple of years will be dramatically better than we expect.
Right now those examples seem far and few between. With the inevitable unwinding of unprofitable companies, consumer households over their heads in debt and employment numbers continuing to sink rather than grow, there’s a greater likelihood of another leg down before any real renewed growth takes hold.
Our Continued New Investment Approach
We are maintaining our approach of looking to buy out the market bottom using a twenty-four monthly dollar-cost averaging strategy. This allows us the flexibility to move more aggressively when indicators suggest or opportunities avail themselves.
We feel confident that our flexible, but consistent advanced planning approach, can help in times that are financially challenging.
As always should you have questions with your portfolio, we’re always available to talk and discuss.
Mark, Sean, Cass, Nancy & Simone