There are not enough superlatives in the English language that can adequately describe the magnitude and impact that the COVID-19 crisis has thrust upon the world. Life as we knew it has suddenly and inexorably ended and we now find ourselves navigating through one upheaval after the next in markets, economies, education and healthcare systems and seemingly, the entire human experience. In some ways, we are eerily reminded of the moment in Aldous Huxley’s 1932 novel, Brave New World, when the main characters first venture beyond their utopian existence and are forever changed after witnessing the harsh realities of the outside world.
It is difficult to estimate the amount of near-term damage to the global economy as the growing tidal wave of unemployment, defaults and human casualties surge, while confidence, capex and consumption fall. By any measure, Q2 will be one of the worst quarters ever recorded in modern history. We have moved from a decade of steady growth to a major global recession all in the span of a single month. The duration and severity of the new recession will be dictated by how long it takes to get the virus under control, which is inherently unpredictable. While there are clearly some significant economic challenges today, we also have some very important supports: 1) global monetary and fiscal policy response has been swift and massive, amounting to 35% of US and 17% of global GDP, 2) dislocated credit markets are starting to function more normally again as the Fed continues to support more and more market segments, and 3) we are starting to see some initial signs of curve-flattening in areas first affected by the pandemic. Time will tell and we expect markets to remain extremely volatile in the coming months.
Figure 1: New Roadmap for 2020?
Source: Cornerstone Macro
In terms of portfolio strategy, we have used the recent rally to adjust our risk exposures, raising cash levels and further evolving client investments to incorporate themes such as genome sequencing and healthcare innovation. We believe these investments will benefit from the new environment around us and prove more resilient to the expected volatility ahead. While we know volatility can be uncomfortable for many clients, we would offer that our investment team is very experienced and has managed assets through many bear markets and recessions before. Capital Planning Advisors invests in some of the very best institutional research, analysis and trading tools, which allow our team to objectively monitor and process market conditions and adjust our clients’ risk-balanced allocations accordingly.
Our firm remains extremely stable and our team is safe, healthy and has adapted quite well to working remotely. Though most of our staff is currently working from home, our office is open, and we maintain 100% of our functionality in communication, trading, information security and client service.
Figure 2: Your Virtual Capital Planning Advisors’ Team
As always, we deeply value and appreciate your relationship and trust in our team. In uncertain times like these, we know the value of relationships matter most. We are honored to be able to serve you through these tumultuous times and are looking forward to better days ahead. We would also like to take this moment to acknowledge our deep appreciation of the efforts and heroics of the thousands of professionals in the healthcare, biotech, first responder, grocery and essential retail, and transport and logistics industries. They are tirelessly fighting this new world war on the front lines, doing their best to preserve lives and help return us to some sense of normalcy and for that, we are grateful. Please don’t hesitate to contact us if you have any questions or if we can be of further service. In the meantime, be safe, be well and stay healthy.