After falling into the quickest bear market in history, markets staged a partial recovery from the lows posted after their capitulation in March. Optimism followed announcements of record government spending to cushion the economic impact, the response has been far bigger and quicker than anything seen in the GFC, but questions remain about whether it will be enough.
The next few weeks will see the peak of infections in Europe and the US, but it will be ugly in New York as well as in the less developed countries around the world. The US is the largest economy in the world and markets tend to follow the lead of Wall Street. Australia is outperforming the world on flattening the curve and importantly, China is back to work. There is a template for getting through the initial part of the health crisis, but the prospect of lingering containment restrictions means that it too soon to understand the true economic impact.
These times will be unnerving for investors and there will be false starts while navigating the challenges of a bear market. I have shared a note from Howard Marks, who sets out a positive and a negative case for what may lie ahead for the US. It was written after Wall Street rallied over 15% from its lows and Howard commented:
“I would say assets were fairly priced on Friday (27 March) for the optimistic case but didn’t give enough scope for the possibility of worsening news. You may or may not feel there’s still time to increase defensiveness ahead of possible negative developments but the most important thing is the be ready to respond and take advantage of declines.”
In my view, it makes sense to be prepared for things to get worse before they get better. A number of the job losses we are seeing today are likely to result in lingering long term unemployment. However, what we are going through is transitionary, a full recovery may take several years but growth will return quickly and this is an opportunity for long term investors.
The full note from Howard Marks can be accessed via the link below:
Howard Marks – Which way now?
Looking at this from a health perspective, I have shared a link to a video from a doctor who is working in the Intensive Care Unit at Cornell Hospital in New York. The video is from a call to share information with other health professionals on how to protect their families. I found it provided a practical understanding of how the virus works from someone in the front line, as well as the simple measures that can be taken to protect each other.
The video from Dr David Price can be accessed via the link below:
Video: Empowering and protecting your family – Dr David Price
These videos and emails from me are not meant to replace a conversation, so please do not hesitate to reach out. You can book a time directly in my diary for a catch up by clicking the link below:
Book a meeting with Rob
The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.