March 11, 2020
Corona Virus Update/ The Rollercoaster
The Corona virus panic has all of us on the rollercoaster of emotion. The financial markets have been a reflection of this rollercoaster, swinging wildly in reaction to the uncertainly about the virus and its economic impact. Maybe it is time to take a deep breath and sort through what we know and don’t know.
Our US economy, with nearly full employment and aided by low US interest rates, is fundamentally strong. Global central banks are cutting interest rates, and governments, including the US, are working on fiscal stimulus to relieve those sectors of the economy most affected by the virus. The Biotech and Pharma industries are focused on therapeutic solutions and vaccines, seeking quick approval of both cures and prevention. Public health attention to increased personal hygiene and reduced social contact will have significant impact on the spread of the virus.
The current data from China, where the Corona virus started two months ago, is showing signs that the crisis is winding down. New cases have dropped sharply and over 76% of confirmed cases are now recovered. The Chinese economy and manufacturing supply chains appear to be recovering quickly. Globally, fatalities are predominately with those already suffering from respiratory disease or the elderly. Indications from China, Korea, and other countries affected early in the crisis are indicting overwhelming recovering rates for the vast majority of the population.
In addition to the virus, this past weekend the oil market reacted wildly to Saudi Arabia and Russia failing to agree production quotas in the face of falling demand. Falling oil prices caused a flight to US treasury bonds and a stock market sell-off. Low oil prices will severely pressure the economies of the oil producers themselves making it is unlikely this situation will persist for long.
The markets will continue their rollercoaster ride until we have answers to the things we don’t know. Virus testing is increasing in the US and the impact of the virus here will be clearer soon. Government fiscal responses are on the table and these could support the economy in the short run. Medical responses are moving quickly through development, trial, and approval with positive indications in the news.
In spite of the last two weeks, we believe the economy will recover as the Corona virus runs its course. Full employment, low interest rates, supportive government initiatives, technology innovation and the historic resilience of the US consumer are all reasons to remain focused on the long-term positives amid the temporary impact of the current crisis. Our portfolios have losses, but they have fared much better than the overall market. We are focused on quality investments that have shown resilience and promise beyond the current crisis.
The current level of the stock market parallels February 2019, meaning the retracement has brought us back to levels where value can be found. We have cash available for investment and are looking for signals that the correction has run its course.
While we don’t want to minimize the situation, we believe the virus will be contained and solutions found. In the long run, we expect the markets to recover from the current panic.
Our prayers are with those who have lost loved ones during this crisis, and those faced with the uncertainty brought on by its impact. We believe that faith that is tested brings all of us closer together and closer to our God.
We are here if you have any questions or concerns.
Ed, Branson & Claudia
At Calyx, we help families protect and manage their financial resources. We are a financial advisor and investment manager that partners with our clients to administer their financial affairs with personal attention and active risk management. Calyx is also advisor to charitable trusts and endowments, working with committees of faith-based organizations to preserve their legacy while providing operating income. We are sensitive to the investment needs of these clients while working within the guidelines they have established to reflect their principles.