Thanks to my grandson (aka Olaf), the songs from the movie Frozen are now my forever earworms. This pertains particularly to “Into the Unknown,” which is an appropriate opening to this email.
To date, worries about the unknowns of the spreading coronavirus have driven most equity markets into negative territory and bond yields to near record lows. The knowns are that this epidemic has globally disrupted economic market activity. The efforts necessary to contain this virus are offsetting the positive impact in the easing of trade policies and an accommodative monetary policy. We likely will see renewed weakness in global manufacturing due to the virus’ impact.
We believe that any further tightening of financial conditions will be offset with additional easing by central banks. Fiscal policy will also be part of the equation with additional spending in public health and a provision of monetary relief to hard-hit industries.
Questions are: How much easing? How soon it will take place? How coordinated will it be globally?
The U.S. economy is still strong and global expansion is still intact. However, the unknown transient shock of the coronavirus to the market has prompted us to look for stabilizers to offset market volatility.
While we continue to stay invested in quality, low volatility U.S. equities that produce steady dividend income, we also have added to positions in U.S. Treasuries and gold as portfolio ballasts. Sustainable energy is a recent investment that has significantly out-performed fossil-fuel energy.
Looking forward, after the market shock from the virus, there will likely be a steep acceleration of the markets and as always, we will continue to look for opportunities to help you to reach your financial goals.