Our Monthly Outlook

April 2020 Market Update - Trajectory

April 1, 2020

We are in a new world that has 3 inter-related parts -  Healthcare, Economic, and Financial.

On the healthcare front my biggest concern is the trajectory of the spread of Covid-19 here in the US.  “Current U.S. trends are concerning, suggesting a course potentially worse than Italy. “We highlight five dynamics to watch [which we] believe suggest the U.S. is facing a broad and accelerating outbreak.” (Morgan Stanley Biotechnology analyst)

  1. U.S. cases are growing the fastest globally
  2. U.S. mortality is not slowing despite social distancing
  3. New cases are growing faster than testing capacity
  4. New ‘hot spots’ are exhibiting growth above other regions
  5. U.S. social-distancing measures remain less strict than those of other countries

“We would highlight that the biggest risk to this forecast is that while we have reasonable confidence the East and West coasts will reach peak cases in the next 2-3 weeks, the interior of the country is now exhibiting signs of new outbreaks.” (Morgan Stanley)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This is a scary and sobering outlook.  While I pray the trajectory shifts from blue line in the chart on the left to the pink line, my outlook is based on the red line.

On the economic front, my biggest concern is the longer it takes to get the virus under control, so the economy can open back up, the greater the possibility of significant and potentially permanent damage to the economy, both here in the US and globally.  Here, I am praying for a path that follows the dark blue line, but my outlook is based on the light blue line. This would have us in a recession until the end of 2021.

On the financial front, the Federal Reserve and the US government are taking extraordinary steps to support the financial system.  Only time will tell to what extent these actions succeed in limiting the damage.  From an investment perspective , I believe we are in the eye of the storm.  We had the initial damage when the storm first hit in early March. We are now in a period of relative calm, but I expect the storm to swing back around and create more damage. 

Using history as guide, I expect we will likely retest the lows in stocks from mid-March, which would be a 15% decline from where we ended March.   It is also conceivable we could go even lower if the virus drags on and the economy remains shutdown longer. “Waterfall declines – Stocks have broken the initials lows of a waterfall decline almost 70% of the time by an average of 7.2%”  (Ned Davis Research)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right now I believe the market is somewhere between fear and panic (see chart below).  When it comes to your portfolio, I have to weigh the risk of going back into stocks too early, with potential for some additional downside, against the risk of going back in too late, with the potential to miss some of the recovery.  Catching it right at the point of maximum financial opportunity is virtually impossible, more so in these uncharted waters.  Please reply to this email (or give me a call) to let me know your thoughts on going too early or too late.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As always, we continue to monitor your portfolio and the market/economy continuously.

 

 

April Calendar of Events   (comments and additions for future months are always welcome)

  •          April  is National Autism Awareness month.  Let’s all get educated on this issue and works towards acceptance and inclusion of people dealing with autism.

 

April 9th                       Passover begins – Chag Pesach Sameach

April 10th                     Christian’s wife Maecy birthday

April 12th                      Easter Sunday – Have a blessed and Holy Easter

April 12 & 13th            We adopted our 4 legged children Coco (2010) and Buddy (2013)

April 15th                     Tax Day.  Remember to make those IRA or Roth contributions.  NOTE:  Tax day extended to July 15, 2020!

April 22nd                     Earth Day – let’s all recycle, turn out lights when we leave rooms, and do all we can for our environment      

April 25th                     My daughter Satya’s birthday – wow she is turning 35!  I must be getting old ��

 

Sources:  Ned Davis Research, Oppenheimer Investments, Blackstone, Morgan Stanley Research, Westcore Funds

 

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.