SUMMARY
“The worst pandemic in modern history was the Spanish flu of 1918, which killed tens of millions of people. Today, with how interconnected the world is, it would spread faster.”
Bill Gates, 2014
1Q, 2020 Market Review
GROWTH, INFLATION & POLICY
“The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!”
Donald Trump, February 24, 2020
Lockdowns & Other Containment Working: Broad-Based Plateauing
Hopeful Signs that the Curve is Flattening
Global Recoveries Are Now Keeping Pace with Cases
Total Shutdowns, Partial Shutdowns & Some Increases
U.S. GDP Estimates
Trump vs. Biden
Election and Post Election Year Annual Returns for Large Cap
Most Measures of Core Inflation Have Come Down
Per Economists, Unemployment Rate Could Approach 20%
Unprecedented Central Bank Balance Sheet Expansion
Global Policy Response to COVID-19
EQUITY
“One of the things that we’re hearing a lot from business contacts and leaders in the community is our concerns that even as the pandemic passes, even as the restrictions are relaxed gradually over time, people may take quite a while before they’re willing to get back on airplanes or trains or go to the theater or go to concerts and things like that. So, I think there are some risks that it takes longer to get that recovery for the economy than just what happens in terms of the formal restrictions that are in place.”
John Williams, New York Fed President, April 2020
Equity Returns
Coronavirus Crisis vs. Major Bear Markets of History
Equity Market Internals: Decline & Rally
Higher Unemployment Generally Means Lower Equity Prices
The Great Battle of the Economy vs. Markets
Decline in EPS Has Driven Valuations to Cycle Highs
Emerging Mkt Equities Look Cheap Relative to Book Values, But…
Current Growth Cycle at Extreme Levels
CB Balance Sheets and Global Stocks
Buybacks: Large Source of Equity Demand Slowing
U.S. Corporate Profits Were Rolling Over Prior to Coronavirus
Venture Capital Washout
Markets Are Not Always as Efficient As We Think
FIXED INCOME & CREDIT
“We can do what we can do, and we will do it to the absolute limit of those powers… we will keep at it, and we will be at it with the legal authorities that we have until we get through this thing. We will keep using our authorities… but there are authorities that we don’t have and there may be a need for those authorities to be used as well as ours.”
Jerome “Jay” Powell, Federal Reserve Chairman
Fixed Income & Credit Returns
A Record Year for U.S. Core Bonds
Negative Real Yields Across the Curve
Watch Credit to Lead Equities On the Way Out
Credit Was Already Cracking Before the Crisis Started
Credit Was Already Cracking Before the Crisis Started
U.S. Bank Provisions for Loan Losses Jump
Prior to Crisis, Leverage Was Above Last Cycle Peak
Leveraged Buyout Valuations
REAL ASSETS
“There is no safe store of value. Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”
Alan Greenspan, Economist & Former Fed Chairman, 1966
Real Asset Returns
Negative Yielding Debt & Gold
Gold vs. Core U.S. Stocks and Bonds
U.S. Crude Oil & Gasoline Inventories Jump
Crude Briefly Trades Below Negative $38 Per Barrel
Commodities Below Cost of Production
Midstream Energy: Survivors Should Thrive
Retail, Hotel & Resort and Office REITs Remain Challenged
OPPORTUNISTIC
“Business are closing and people are unemployed through no fault of their own, and so moral hazard is not a relevant consideration”
Richard Clarida, Fed Vice Chairman
Opportunistic Strategy Returns
Closed-End Fund Discounts Got as Wide as the Financial Crisis
Like Gold, is Bitcoin Telling us Something About Macro Risk?
ASSET ALLOCATION
“An expert in any field will have an advantage over a rookie. But neither the veteran nor the rookie can be sure what the next flip will look like. The veteran will just have a better guess.”
Annie Duke, Thinking in Bets
Diversification Still Works Over the Long-Term
60/40 Expected Returns Rise as U.S. Stocks Decline
Equity Yields Still Competitive Relative to Bond Yields
Asset Class Correlations
