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BCA Weekly Commentary 4/3/20

Updated: Jun 12, 2020

SUMMARY. This week marked continued focus on virus case & death increases and calls for additional stimulus as concern over the economy grew. The unemployment rate grew to 4.4% as 10 million filed for unemployment in past 2 weeks with these numbers likely doubling or more in the next 2 weeks. The concern is that the administration has not put a time table for ending the economic shut down, instead allowing health officials to guide that time table which goes well beyond April. Furthermore, (as documented in FB our posts) progress on the drug therapy front is being thwarted not only by the media, but health officials themselves who seem adamant not to accept widespread anecdotal evidence of the effectiveness of certain therapies such as Hydroxycholoroquine & Z Pak. Thus, its left up to the administration to push its use which for the most part which has not yet happened. As a result, there remains uncertainty among doctors for a standard of care which maybe perpetuating the spread as distancing is being used as the primary weapon. Further, its fueling calls to extend the shut down. Some of this is driven by science via demanding formal trials (which will take months) and some by ideological differences while others factor out economic implications all together instead accepting a longer time table.

INVESTMENT IMPACT. The fate of the length and depth of the recession is largely dependent on leadership of the US administration. If the economic shut down extends beyond April, it may result in much deep recession (multiple quarters) and much longer recovery period than we expect. Additional, stimulus may help, but is unlikely to dent either over extended periods as business failure & unemployment rates may accelerate creating a cascade financially. In sum, we are hopeful the administration will come to some medium and create a formal "economic restart plan" (addressing health concerns as well) but we recognize the media & medical community is against reopening the economy for most part. For the week we made minor changes to model portfolios, mostly in the growth models, shifting allocations from Telecom & China to domestic brand names that may recover over time if economic growth resumes in the second half of 2020. In the coming days we will continue to review allocations based on the time table of re-opening the economy choosing to add or reduce risk accordingly.

For more insights see our website and disclosures found there at BCA. As always contact us for further explanation of how these events can affect your finances.

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