Market and Economic Commentary

• Not long ago, last year’s trade war seemed to be subsiding, central banks had reduced interest rates or otherwise increased monetary support, and that stimulus was showing up in January and February. Employment remained high, manufacturing was improving, and consumers were spending. Overall, the U.S. economy was doing quite well early in 2020.
• Then Coronavirus, initially mistaken as a “China problem” alone, spread quickly and globally, bringing the (world) economy to a near halt. Save some consumer durables, grocery consumption, and pockets of e-commerce, March data promises to be uniformly bad.
• The resulting Gordian Knot (isolate versus engage) creates numerous questions which are difficult to answer. How quickly can the economy recover? That depends on the health (and confidence) of its participants. Have consumer and professional habits changed permanently, or will we mostly revert back to normal? Regarding the latter, we suspect that the Coronavirus will simply speed up changes that were already occurring, versus creating wholesale, permanent changes in the way we live and work.
• In terms of the market, much of the bad news and dire expectations appear to be priced in, at least for now. Depending on the success of social distancing, medical initiatives, and government responses (fiscal, monetary, and other), we are cautiously optimistic that the market can recover further as the economy recovers in the second half of 2020 and beyond.

Download the full report in pdf here: IMVA Investment Review-April 2020