Dear Clients and Friends, May 3, 2020
April Showers Bring May Flowers
As we all live our best quarantined life, it is easy to forget how quickly things change. If you remember back to the start of my Sunday Evening Thoughts series in March, markets were in full panic free-fall with an added dose of volatility for good measure. April then managed to bring much-needed respite in equities with the bear market surging back 27%. The Vix (volatility index) continued to decline in April, falling back to a low of around 30, a number last seen the first week of March.
While I certainly don’t believe the volatility has subsided for this market event, the need for disciplined investing is paramount. Fear and greed are two forces that can and sometimes do wreak havoc in portfolios. Investors tend to forget the long-term nature of their investment goals, selling at low points and then weeks or months later experiencing higher prices. Always have a plan, always be planning, and understand what your long-term goals are. Last week, we spoke about the possible need to be raising cash in risk averse portfolios. This week, long-term investors with the goal of capital appreciation should be considering entry points. My view was and remains to be, we will most likely see a retest of market lows before completing this cycle. This is not always an exact science and never will be and I may be completely off in this thinking. But if you have to put money to work, get back into the market, you will certainly want to have a plan of when and how much to put back to work. The year 2020 has not been anything anyone has exactly planned for, but we never stop having a plan as the data set changes.
Ground Hog Day, Again
I was only half joking when I said Kim Jong Un could either be perfectly healthy, in a vegetative state, or dead. Well to the surprise of no one, Korean Central News Agency reported he was alive and well and pictured him smoking and laughing at a May Day Celebration sitting alongside his sister. The mystery remains and some things never change.
Don’t forget to check those bank accounts if you have qualified for the $1,200 stimulus check payments. Anyone who has filed a recent return should go out to the IRS website located here: https://www.irs.gov/coronavirus/get-my-payment to check on their status and find instructions. If you haven’t filed a recent return and need to enter your deposit information you can start here: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. Please be aware, the IRS and Treasury department are not calling you for this information. So please, don’t be scammed over the phone.
FDA Will Clear the Way
The current administration has stated they will request COVID-19 treatments, receive expedited approvals from the Food and Drug Administration. This weekend, the FDA authorized emergency use of remdesivir for the most critically ill COVID-19 patients. This can be used in both adults and children who are severely ill, suspected or confirmed to have COVID-19, and are experiencing low blood oxygen levels or who may be on a ventilator. This treatment comes to us from the public sector, Gilead Sciences. We believe that we’ll see continued efforts for treatment and the eventual vaccination that will be able to provide normalcy back into our lives. Sir John Bell, Regius professor of medicine at Oxford University, also reported over the weekend the prospects for Oxford’s candidate vaccine are “pretty good” and that “as every day goes by, the likelihood of success goes up.” Researchers hope to have data from phase-two trials that would provide evidence of efficacy by the beginning of June. This is happening at lightning-speed for a virus of this magnitude, albeit not fast enough for some.
When the Going Gets Tough, the Tough Get Going
There will be great stories eventually shared in documentaries providing historical perspective, on how some of the greatest brands of our time, have stepped-up to the plate during this difficult time and answered the call. Carhartt, America’s most trusted workwear brand in April shifted production to make 50,000 medical gowns and 2.5 millions masks, which are all in short supply. Other names like Brooks Brothers, H&M, Gap, and Canada Goose have all pitched in and pivoted production lines in creating more PPE for health care workers. Our front-line medical staff are truly the heroes during this pandemic and need our prayers and thanks. But let’s not also forget the companies who have given their support to keep them safe.
High Frequency Data Changes
|Data Set||% Change year over year|
|Initial Jobless Claims, April 18th||1,569% year over year, 1,858% prior week|
|Weekly Retail Sales, April 18th||-8.1%, prior week -6.9%|
|Box Office Receipts, April 10-16th||-100% year over year, prior week -100%|
|Rail Car Traffic (cars), April 18th||-22.4 year over year, prior week -23.3%|
|Steel Production (net tons)||-34% year over year, prior week -33.6%|
|Hotel Occupancy||-62.2% year over year, prior week -64.4%|
|Hotel Revenue per Room Available||-78.4% year over year, prior week -79.4%|
|Open Table Restaurant Reservations||-100% month ago level, prior week -100%|
|TSA Checkpoint Data||-94.7% year over year, prior week -95.8%|
|Supply of Motor Gasoline in US||-36.5% year over year, prior week -43.6%|
Source: First Trust Advisors, Department of Labor, Redbook Research, Box Office Mojo, Association of American Railroads, American Iron and Steel Institute, Hotel News Now, Opentable, Transportation Security Administration, Energy Information Administration
As always, if you have concerns about your own portfolio, give us a call. Where are here to help you through these challenging market conditions. Don’t forget you can follow us on Twitter, Facebook, and LinkedIn for other important updates during the week. Our office is still doing virtual client reviews. Call to schedule yours today, 815-577-9125 or 615-591-2490. Continue to be safe.