I have heard from several of you that you appreciate our notes, so forgive me if others of you are tired of hearing from us.
We know and expect you to question how safe we are keeping your money right now. And you should. The toughest moment of our work as investment specialists are at the top of market, where clients question why we aren’t being more aggressive, and the market bottoms like we are experiencing right now, where the concerns creep in that we may not have been conservative enough.
Man, do we get it, and we accept your concerns. You have given us a great deal of responsibility and we truly appreciate your trust in us. I (Jim) am writing this at 7AM on Saturday because I am up, along with the other members of the Investment team, learning and researching information that will give us indications of how global economies are dealing with this crisis. And Mary Lu and I have already been emailing between us on the several new issues which we are researching as a team. Our entire crew has been tirelessly working around the clock to not only stay up to date but to strategize on how to respond, protect, and plan for the future.
An important question we are researching currently, “Globally, will we continue to spend during this pandemic?” While the world has shut down to overcome this virus, thanks to the internet, business will continue. I am betting that you spent some part of your weekend shopping on the internet. It’s what we do now, particularly while we are shut in. The question will be, “If this shut down lasts for more than the next few weeks, will businesses be able to deliver the goods and services that you want to purchase?” If delivery of these services and goods slows down for longer than expected (in our opinion, beyond May 1st), then the global economy will be worse than expected and it will take longer than year end to recover, in our opinion.
Our crystal ball: We will endure a “W” shaped recovery. Many economists believe we will go through a “U” shaped recovery in the stock market. That means that instead of a quick recovery, often referred to as a “V” shaped recovery, we will dwell in this lower market range for a few months before returning to January 2020 stock market levels.
Our expectation as an investment team is that we will endure a “W” shaped recovery. We agree that the market will likely rebound by the summer, given as much because we had a very healthy, strong economy heading into this pandemic and all other things being equal, it would have likely done well through this election in November. In fact, we believe that the current administration would have done all in their power to make sure we had a strong economy through November 3rd, when we all head to the polls.
Barring considerably worse economic results from this pandemic in the U.S., we believe this should occur, particularly in certain sectors (which we will discuss below). However, much of the rest of the globe was at or in a recession before this pandemic, and it will likely take much longer for many of our trade partners (Italy, Germany, China, Mexico, Canada, etc.) to recover. That will likely put a strain on our own growth and recovery in early 2021, no matter who wins the election. Therefore, in keeping with the alphabetic descriptor of our economy, we predict that we will endure a “W” shaped economy over the next year.
We will therefore take our time getting back into this market and choose our purchases wisely. For example, we see certain sectors coming out of this slowdown in greater need than before. The obvious ones are Medical Devices, BioTech, and Medical Properties. We will therefore increase our holdings in those sectors. We also believe that old world technology (Apple, Intel, Oracle, etc.) will continue to perform well. This pandemic will reveal other sectors in demand, and we will be sure to add more to those that should be in greater need, while reducing those that will suffer through a global slowdown. We promise we are not buying Royal Cruise Line right now!!
We hope you will allow us to boast that what we did in the last few months was a matter of skill more than luck. We took gains off high-risk positions to reduce your exposure to sudden drops in the market. Yes, you may have had capital gains that your tax advisor may have questioned, but we captured those gains to reduce your risk. That is what you pay us to do. Now, our job is to find the optimal time to safely put your cash back into the market with the hope of giving you more gains! This will take time, so please bear with us. Our crystal ball (otherwise known as solid research) is good, but this will be a tough market to work in. We assure you that we are up for the job.
If your friends and family are nervous that they have lost too much in this market and/or have not heard from their advisors, you are welcome to have them contact us. We welcome the opportunity to take care of them as we do with you. Even if we can provide them with a 2nd opinion, which we are happy to do, you should tell them that your Investment Management Team has been actively taking care of your portfolio and can do the same for them. We always offer a complementary initial session/conversation, so at the very least we would be happy to provide them with valuable information right now that could provide them with a much better plan for their hard-earned savings.
We appreciate your trust in us and we wish you and your family a safe and healthy time through this process. We have several tough weeks ahead of us all, so if there is anything our team can do for you, please let us know.