Investment Recap First Quarter 2020

Things are better! Better than at the end of March. Most importantly, New York, the epicenter of the Coronavirus epidemic in the U.S. has “bent the curve.” We are seeing governors in several states plan to gradually re-open parts of their economy. The stock market has responded with a remarkable recovery from the panic levels reached on March 23.

There are clear winners in the changed environment we are in. Healthcare and Technology sectors are likely to have continued success. Less clear, due to the recession and heightened unemployment are investments in consumer and financial sectors. Our more than 50 years of market experience has taught us many lessons, the most important being a belief in “the time compression of events”. Just as we have experienced the most rapid Bear Market decline in history, we have had a historic recovery based on lightening quick monetary, fiscal and Phama responses to Covid-19.

The current investment environment reminds us of the problems and opportunities presented during the “Great Recession” of 2008-2009. In both periods we sold off weaker conviction holdings, which created cash. We then focused on companies with solid balance sheets and unquestioned prospects. In addition, we held or added to a handful of stocks that were sold down to exceptionally attractive levels. This approach resulted in superior performance in 2009 of 56% for our All-Cap stocks and 92% for our Small-Cap stocks. Then and now, we expect, small cap stocks went down more in the decline and move up more in the recovery.

A note to our clients with IRA’s and retirement accounts who normally have a Required Minimum Distribution (RMD). The Cares Act has a provision to make the RMD merely voluntary for 2020. Please call us if you have any questions on this matter.