We are living in different times, which calls for a different breed of quarterly commentary. For the first time in many years, it will not be written by Stephen Griner, Persium Group’s Chief Investment Officer, but by Will Bowen, Senior Analyst. I asked Stephen if I could write in his place, as I felt I had some pressing thoughts to share. As of my writing, almost 2,000,000 worldwide have tested positive for the novel coronavirus, COVID-19, and over 123,000 have died. Almost 600,000 in the United States have tested positive, with almost 25,000 deaths. There have been major outbreaks across the globe, from Wuhan, China; to Milan, Italy; to New York, NY; to Albany, GA. Unfortunately, by the time you read this, all of those numbers will have increased.
I could now write how this was the worst first quarter for the U.S. markets since the 1930s or how U.S. small company stocks were down almost 40% in three months. I could report returns which show how international markets fell as much (if not more) than U.S. markets. I could describe the day when U.S. Treasuries (normally one of the safest investments in the world) were selling off as quickly as stocks when investors around the world sold any securities possible to raise cash. I could explain how oil dropped so much, so fast, that we saw gas sell for under $2 a gallon (as if we had anywhere to drive). In the middle of March, markets were not functioning efficiently; at times, there were sellers and few to zero buyers. I could fill the page with examples of the stress markets were facing in the first quarter. However, chronicling facts would not tell the whole story. Life changed for us all in March.
In early March, we began to hear of a few coronavirus cases in the United States. The week of March 9th, changes began at a dizzying pace. On March 11th, a player for the Utah Jazz tested positive for COVID-19 and the NBA season was suspended indefinitely. By the end of the week, all major sports leagues suspended operations. On the 13th, a travel ban to and from Europe was instituted. By the end of March, countries around the globe restricted travel and prohibited entry to non-citizens outside their borders. March introduced us to the term social distancing, which we are now expected to practice for the foreseeable future. By the end of the month, the vast majority of the United States was in some version of a lockdown, shelter in place, or shelter at home; the terms differ, but the idea is the same. We are expected to leave home only for essential activities. Restaurants, retail stores, and businesses across the country have been forced to close until further notice. Travel has become almost nonexistent — one day in early April saw the TSA screen fewer passengers than on any single day since 1954. For freedom-loving Americans, this is a world we could have scarcely imagined.
It seems clear we are headed for a recession, if not already there. Unemployment is expected to move to a much higher level; economists expect anywhere from 15% to 32% unemployment. The high end of the range puts the unemployment rate above any experienced during the Great Depression. The hope, however, is that many of the layoffs are short-term and employees will be asked to return when businesses re-open.
To combat the virus and the economic fallout, both the Federal Reserve (the Fed) and Congress have taken extreme measures. Congress passed three relief bills, the most comprehensive being the CARES Act. Costing around $2.3 trillion, the CARES Act provides funding directly to individuals, small businesses incentivized to keep employees working, enhanced unemployment benefits, and many other provisions. Congress has not hesitated to make it known they are willing to do more, and they have not acted alone. The Fed also took actions to shore up the economy. Almost immediately after the declaration of a national emergency, they lowered the Federal Funds rate to 0% (the rate at which banks and other depository institutions lend money to each other overnight). They restarted a program created during the Great Recession, known as Quantitative Easing, enabling them to buy Treasury Securities and Mortgage Backed Securities. Additionally, they have taken steps to shore up Money Market Funds and the Commercial Paper market. The Fed has not been subtle in stating they will do whatever they can in order to avoid a financial crisis.
Possibly due to actions by Congress and the Fed, markets recovered from their lows of March 23rd, but much uncertainty remains. Companies are just beginning to report first quarter numbers, and they are expected to be well below the first quarter of 2019. While we believe markets will recover, the timing of the recovery is not yet clear.
Exposure to constant news of the rising death numbers, rising unemployment, and a declining economy can quickly become overwhelming. In these times, I have tried to focus on the positives coming out of this pandemic: spending more time with family, from family walks; to movie and game nights; to fishing with my son. The generosity of the American people has not waned during these difficult times; it has flourished. I have read countless stories of corporations, celebrities, and everyday Americans going above and beyond to help their fellow man. I would be remiss if I did not mention the amazing courage and sacrifice of all the first responders and workers in the medical community.
At Persium Group, we are keeping abreast of daily developments during these times. While the world may look very different, our overall investment philosophy does not. We believe in keeping cash to cover short-term and medium-term spending needs. We believe in a diversified portfolio and an asset allocation that makes sense for your unique financial situation and risk tolerance. And we believe in staying the course during difficult times.
As I write this, I hope we are in the United States’ darkest hour in our fight against this virus and that brighter days are ahead. I was uplifted by Queen Elizabeth II’s speech in which she said, “We should take comfort that while we may have more still to endure, better days will return: we will be with our friends again; we will be with our families again; we will meet again.”
I, too, am confident that we will overcome this great challenge as a community and as a country.
The views and opinions expressed are of Persium Advisors, LLC. This commentary is provided for educational purposes only and should not be construed as investment advice. Persium Advisors is an investment advisor firm located in Atlanta, GA.
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Persium Group consists of three teams: Persium Advisors — wealth management for business owners and other investors, NAVIX — exit planning for business owners, and CoVerity — serving the needs of retirement plan committees.
The Persium Group, formerly known as White Horse, is an independently owned and operated firm that was founded in 2004. In 2010, White Horse Advisors, LLC registered with the Securities and Exchange Commission as an investment adviser allowing us to operate in a product neutral, fee-only investment environment.