Newsletter 04/30/2020

The rhythm of our lives has adapted to the “new normal”. Work at home, daily walks, the challenge to keep the refrigerator full, try new recipes, Zoom calls and staying connected to friends. I watch too much news and hope you don’t. My wife stays far from the news; she is much smarter. My excuse is that listening to the news is part of my work. Why? My hope is that it gives me perspective and understanding of markets. Bond markets reflect the concern of the news and the stock markets-at the moment-seem to reflect the return to normal over the horizon. Which is right? In regard to different sectors and asset classes, both are probably correct.

The generally accepted principle is that stock markets are forward-looking 6 months. 6 months from now is October 2020. During the 2008-9 recession and subsequent recovery, stock investors looked for what’s called “green shoots.” “Green shoots” are like the buds on trees in the springtime that would blossom into flowers and then into fruit. Todays “green shoots” are Covid-19 treatments, a vaccine, and the phased opening of the economy.

Earnings reporting season is upon us, unfolding rapidly over the next two weeks. The Fed meets this week and will release a statement. It’s possible Federal Reserve chairman Powell will have a news conference and take questions. Although still elevated, volatility has dropped from its peak of over 80, setting a new record. Intraday movements on the stock market of 1% or greater have set a record for frequency for the year and it’s only the end of April. My best guess is that we have more volatility ahead, more risk. Who expected this quick rebound from market lows? This is why we don’t sell. Timing the markets is problematic.

The Federal Reserve has announced it will keep interest rates at current levels until the economy recovers and inflation reaches 2% - as long as it takes. The drug Remdesivir has shown efficacy in small trials. Parts of the country are beginning to open for business. Attendance at reopened businesses is slow. Time will tell how quickly reopening takes effect on the economy. Market averages were up substantially yesterday, 4/29, and April could end up holding the biggest monthly increase in averages since the great depression. Go figure.

It’s worth addressing some of the silver linings. Between more foot traffic and home cooking in the kitchen, batches of sourdough starter, Dalgona coffee, and Instagram fitness challenges there is some good that has come out of this on the home front. Shelter in place has afforded many the opportunity and time to live outside of calculated routines. Have you tried any of the top quarantine trends?

More time with the kids at home has meant 100% participation in schooling (preschool age and younger for both Monique and Elizabeth) which has meant a lot of Zoom classroom calls, kitchen-table science projects, seed planting, and necklace beading. All experiences that were previously exclusive to the school day classroom, teachers, and classmates, are now shared with family at home. Monique’s daughter’s class has a special treat with Monique leading morning yoga each ‘school’ day over video call!

Elizabeth’s kids have been able to have more time to explore the great outdoors at their home in the sierra foothills. With warmer spring weather upon us, this treat of time away, previously reserved for three-day weekends, has provided a chance to hunker down while still remaining in connection with clients thanks to satellite Wi-Fi and two parents at home. Without commutes, there’s more time for enjoying the kiddie pool, playing in the mud, and free play outside, all things many appreciated about their own childhoods.

These are strange times. Schedule overhauls and defining and redefining ‘normal.’ Even in the strangest of times, we have to remember to let the light in. Keep sending us your updates. We’re here for all of it! Happy to be alongside you as your advisors.

Kindly,
Your SAS Team