Key Points
- Challenges include elevated virus transmissions, high unemployment levels, the Presidential election and stretched valuation metrics
- Monetary and fiscal policy combined with vaccine developments are likely to continue to support risk assets
- Fundamentum strategies remain modestly defensive with above-average levels of cash and a distinct tilt toward quality in both equity and fixed income allocations
2020 will be remembered as the year the coronavirus severely tested the basic freedoms and tenets of capitalism in the United States. The virus has proven to be highly efficient in disrupting many of the daily routines we typically take for granted. Like an engine needs clean oil to operate smoothly, the free movement of people, goods and capital are key lubricants capitalism needs to operate smoothly. The virus is a near perfect friction to this free movement. As we have witnessed, businesses and education systems have difficulty functioning without free movement. Unfortunately, we have also felt the human tragedy the virus has created with nearly 775,000 deaths globally, 5 a number that will sadly go higher. For investors, the result has been the some of the largest and fastest swings in financial markets and economic conditions in history. Yet given all this bad news and volatility, the resiliency of our people and capitalistic economy is truly amazing. In short order, doctors and scientists have developed 8 coronavirus vaccines that are in late stage trials,1 and many new treatments for COVID-19 are being uncovered rapidly. Central banks and governments globally have also delivered unprecedented relief packages designed to bridge the gap until the virus can be brought under control and the free movement of the essential capitalistic lubricants can once again start flowing. In the United States, the Federal Reserve (Fed), Treasury Department and Congress collectively acted more quickly and on a larger scale than ever before during the depths of the crisis in March. As a result, the S&P 500 is at all-time highs, bond markets are functioning well and many businesses that would have likely failed are able to continue operating and employing workers. We celebrate these accomplishments in the wake of the pandemic, but as investors we are most worried about what we see in the windshield rather than the rear-view mirror. As such, we want to explore some of the challenges and opportunities we expect for the balance of the year and describe how we are positioning your portfolios as a result.
Check out the FULL REPORT in the attachment section below.
Chad Roope, CFA®
Paul Danes, CFA®
