We hope this message finds each of you healthy and coping well in these extraordinary circumstances. We write today to offer updates on our business operations, some general comments regarding the coronavirus, and to inform you of a new way we will continue to share pertinent information.
First, due to Governor Tom Wolf’s March 19 mandate that all non-life-sustaining businesses be closed immediately in response to the novel coronavirus, COVID-19, our physical offices are closed until further notice. Our employees are working remotely and leveraging our technological capabilities, and we remain proactive and responsive to our clients. To meet your needs, we are available via email, phone, and video conference.
Second, you are likely aware that this week has seen continued volatile trading in financial markets, with large share price swings both up and down. While disconcerting, this is common as markets seek to ascertain the outcomes around fast-moving information. So instead of speculation, let us once again focus on what we know:
- Testing availability in the U.S. has risen (and continues to rise) dramatically. While this is a highly beneficial step, it also results in more positive test results. Thus, we are seeing the number of diagnosed COVID-19 cases climb. Experts agree this will continue, and there is broad consensus the peak may be several weeks away. The nation is clearly not yet out of the woods in terms of medical impacts.
- The daily briefings from federal and local governments reflect a massive response not seen since world war days. As with increased testing, while such response is unambiguously positive, this rush of pronouncements and actions has caught some by surprise and undoubtedly contributed to the panic shopping and hoarding that has occurred.
- The monetary and fiscal government response has likewise been rapid and considerable. Steps such as emergency interest rate cuts, open market bond purchase programs and liquidity assurance from the Federal Reserve, to money market guarantees, the backing of sick leave pay for workers, and bi-partisan plans to distribute checks to Americans, the full power of the U.S. government has been deployed to backstop and reassure financial markets. The speed in which this has been brought to bear is stunning ― actions taken in just a few short weeks match or exceed those taken over a number of excruciating months in the 2008/2009 financial crisis.
- Equally impressive is the global linkage of such steps ― both medically and financially. Central banks and governments around the world are cooperating and sharing information in a way that overcomes many of their differences. It is heartening to see linked arms in such a time of trial.
- The path of financial markets has likewise seen rapid moves in a globally-linked manner. In a short 16 days, the S&P 500 fell from a prior peak into a bear market, the fastest in history. It has since hovered above and below those levels. Bond yields plummeted (and prices rose) as investors around the world sought the safety of U.S. Treasuries, but then surprisingly rebounded as markets began to price in greater supply from stimulus programs, the determination of central banks to keep short-term interest rates at zero or below, and also some trading stress as lower quality bonds were flooding the market for sale with little to no interest from buyers.
- As we noted earlier this week, it is highly likely the U.S. will enter a recession from the economic impact of virus-related shutdowns. The duration remains unknown, but based on the history of similar event-driven shocks, it remains reasonable to believe recovery will occur later this year. Currently, markets are pessimistic ― perhaps overly so. J.P. Morgan has noted that by some measures future corporate earnings are being valued to reflect a 40% drop and seven years to recover. Based on history of previous event-driven earnings impacts and the current situation on the ground in China and South Korea as their economies reawaken, the rebound is likely to be much sooner.
- Your JFS advisors and teams have been working to follow sound portfolio discipline and practice despite the volatility. Indeed, as we have noted, as difficult as it may be to see and feel, opportunity is created in times of market dislocation. Rebalancing to Investment Policy Statement targets as well as tax-loss harvesting are occurring, and we are paying keen attention to conservative cash allocations for clients with recurring withdrawals. In short, we are following proven and thoughtful strategies that keep your financial plans on track, especially during this time of disruption.
Going forward, as the fluid nature of the COVID-19 outbreak continues to evolve, we want to direct you to our website’s Knowledge Center, where we will post comments and news. We will continue to provide lengthier commentaries if appropriate, but this will allow for more rapid passing along of items we believe helpful. Please bookmark this link for quick access to those updates. As always, your individual advisors and team members are available for specific questions or needs.
All of us at JFS remain grateful for your continued confidence and support in these unusual and challenging times. We wish you and your families peace, health, and safety.