News & Insights
YorkBridge First Quarter Commentary
As we begin the 2nd Quarter of 2020 we face a moment of crisis. The economy has been under tremendous pressure in the face of the global pandemic and our country’s response. This is a moment when all of us take stock of what is truly important to us and in that context we hope that all of you reading this and your families and loved ones are safe and sound.
It seems almost quaint in retrospect to recall the concerns we had about the markets following the outstanding performance we saw in 2019. Most investors, us included, were focused around a few key issues; 1) the US-China trade dispute, 2) the US Presidential election, and 3) stretched equity valuations as the potential catalysts for market volatility. However, the outbreak of the coronavirus represents an exogenous threat, the likes of which we have not seen in modern times. Economies have shut down around the world, social norms have changed, and small businesses are desperately struggling to stay afloat. Government response, which has varied from country to country and state to state, have significantly altered the trajectory of the global economy causing major market disruptions and have reset investor expectations.
The U.S. equity markets, as measured by the S&P 500, finished the 1st quarter down -20%. Confounding investors was the speed at which stock prices declined. Over a period of just 20 trading days, the S&P 500 declined over 30% from its peak, something not seen since the Great Depression. We are now most certainly in a recession here in the U.S. as corporate earnings are expected to take a dramatic fall for the 1st Quarter. Unemployment numbers have skyrocketed and, at the time of this writing, are expected to jump by many millions more.
So where do we go from here? Over the last month we have shared our thoughts with you about the markets, the extraordinary actions taken by central banks, and the financial relief packages passed by the US Congress. In this we absolutely see reasons to be optimistic.
Taking a page from the Financial Crisis experience in 2008, when the Federal Reserve was criticized for being slow to act, they acted quickly and decisively to address this matter head-on by cutting interest rates to zero, reduced reserve requirements for banks, and pledged over $1 trillion in quantitative easing measures. These measures help provide critical support to the financial system and provides extension of credit which should help stabilize markets and promote economic activity. While it takes time for monetary stimulus like this to work its way through the system, we are confident these measures will serve to support asset prices as we move past the worst of the current situation.
On the fiscal front, Congress recently passed a $2 trillion stimulus package in the form of the CARES Act. The legislation is designed to provide relief for individuals and small businesses negatively impacted by COVID-19. In addition to direct payments to individuals and an unprecedented expansion of unemployment benefits, the act offers $350 billion in aid to small businesses with the hope of preventing layoffs and business closures while workers are forced to stay home during the outbreak. For large corporations impacted, $500 billion will be available for loans, loan guarantees, and other investments. Even more encouraging however is the willingness of both Democrats and Republicans to push for yet more government support.
We are not going to predict when the current health crisis will end or when the market will turn around for good. will not at all surprise us to see further volatility and even a retest of the market lows seen in mid-March. As scientists learn more and more about this virus and treatment options advance and containment measures flatten the curve we expect sentiment to change and new opportunities to reveal themselves. Remember that markets are forward looking, and we expect a market recovery well in advance of the economic data rebounding. Investors who remain disciplined and stay invested in high quality strategies are likely to reap the benefits from the massive stimulus injected into the economy.
We continue to review portfolios and make changes where appropriate. Communication has never been more important, so please do not hesitate to contact us should any changes to your situation occur or if you would like to discuss your portfolio or any planning needs.
The Information Contained In This Document Is Based On Data Received From Third Parties Which We Believe To Be Reliable And Accurate. YorkBridge Wealth Partners, LLC Has Not Independently Verified The Information And Does Not Otherwise Give Any Warranty As To The Truth, Accuracy, Or Completeness Of Such Third Party Data, And It Should Not Be Relied Upon As Such. Any Opinions Expressed Herein Are Our Current Opinions Only. YorkBridge Wealth Partners, LLC Is An SEC Registered Investment Adviser Under The Investment Advisers Act Of 1904 (“Advisers Act”). Registration Of An Investment Advisor Does Not Imply Any Specific Level Of Skill Or Training. The Information Contained In This Document Is To Assist With General Planning. Please Consult With Your Own Tax Advisor And Attorney For More Specific Information.