Another day, another fearful response to new information – including a disappointing presidential address in terms of providing detail and restoring confidence, more squabbling and name-calling in Congress with little action, suspension of travel from Europe into the US, “Italy closed”, suspension of the NBA and NHL seasons, cancellation of NCAA March Madness, Hollywood royalty announcing they have the virus, etc… For the foreseeable future, there will be more bad news as we transition from focusing on the specific (two new cases in Florida!) to understanding data and the implications on a larger scale. My belief is that the real issue for markets is not the details of the virus and its spread (which is certainly as tragedy), but our response to it as businesses and consumers. It’s very hard for markets to calibrate both the impact of a novel virus and the derivative response by the collective group of unpredictable human beings.
This too shall pass, but we would agree that the economy could use some “bridges” to get us from here to there so that fear-created disruptions and dislocations don’t become self-fulfilling, permanently impacting vulnerable industries and sectors. In the very short-run, governments need to work together and pull out all the stops. We worry that relationships are so frayed – across political parties, across countries, etc. – that nothing meaningful will get done. In fact, as of now, Congress is heading home on recess at the end of the day – talk about tone deaf! The markets thrive on confidence and our leaders are letting us down across the board.
At some point in the near future, we believe this will end up being a great long-term buying opportunity. But we caution against jumping in with both feet on positive days (there certainly will be some along the way). We would like to see things stabilize and the markets become more rational first – over the last 15 trading days, the average move in the S&P 500 has been 3.7%. Yesterday, we reached a high of 75 on the VIX (S&P 500 Volatility Index). We are also looking for signs from the bond market that yields are stable or heading higher and the inter-day moves are less extreme. Today, yields actually ended up for the day, which is a promising sign.
We will be watching things very carefully on your behalf in the meantime.
The views presented herein are those of Validus Growth Investors, LLC (“Validus”) as of March 2020 and are provided for informational purposes only. Investing involves risk, loss of principal is possible. There is no guarantee that any historical trend illustrated above will be repeated in the future, and there is no way to predict precisely when such a trend might begin. The information is based on the economic and market conditions as of this date. The information is not intended as a discussion of the merits of a particular offering and should not assume that any discussion or information provided herein serves as the receipt of, or as a substitute for personalized investment advice from Validus or any other investment professional.
This material is provided for informational purposes only and does not constitute a solicitation. The material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any forecasts made will come to pass.