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April 2020 Monthly Review

"When the Going Gets Tough..."

By Loyd Johnson, Chief Investment Officer
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Loyd Johnson PhotoA Look Back

Of course, the rest of the above quote is, "the tough get going." It is attributed to Joseph Kennedy, the father of John F. Kennedy. Perhaps in most of our lifetimes that simple but meaningful phrase has never taken on more significance. Not since the Second World War has there been such a global gut-check as we all face now in dealing with the coronavirus pandemic. The hurdles and sacrifices have been many. Never before have we seen such a voluntary economic shutdown with such a universal reach, as countries around the world wrestle with the best practices to slow the spread of the virus.

Even with that, we have seen and heard countless stories of people from all walks of life rising to the occasion to lend their hands in this ongoing battle. From the doctors and nurses to the delivery drivers and grocery workers, the heroic display is the root of what the above quote is all about.

Most of the equity markets responded in kind during the month of April. After an awful March-and negative first quarter, last month saw the broad-based S&P 500 rise nearly 13%, the largest monthly move since January 1987…or 33 years. Other equity benchmarks enjoyed out-sized returns as well, although the trend of U.S. dominance remains. International Developed stocks were up nearly 6.5% and Emerging Markets positive by 9.16%. Other asset classes enjoyed a bounce back month as Real Estate and Core bonds made up some ground as well.

As the red in the Year To Date column indicates, there is still some work to do to get back to where we were at the end of 2019 in almost all of the asset classes, but April was indeed a start. In addition, the stimulus generated by the government through the CARES Act is starting to make its way into the hands of individuals and small business owners. The Fed continued its aggressive response by not only taking, and keeping short term rates to near zero, but also by providing much-needed liquidity to market participants in times of stress. To date, more than $5 trillion has been committed in the U.S. to help stem the tide.

A Look Ahead

Looking ahead is always fraught with many unknowns. There can be little doubt that uncertainty currently rules the day as we deal with an enemy that we are still learning about. We believe that there is great comfort in knowing that the brightest minds across the world are focused on providing answers to this world-wide problem. Perhaps never before has there been such an intense global response to a crisis. This has led to some positive news already with therapeutic treatments designed to mitigate the effects of the Covid-19 disease and more than 90 vaccines at various stages of clinical trials.

Unlike past financial crises, it is the healthcare solutions and responses that will ultimately drive the path to economic recovery. The immediate news has not been good as there have been more than 30 million jobless claims in the U.S. and the most recent first quarter GDP estimate came in at -4.8%. Corporate earnings are coming in negative as expected with some facing significant challenges. Further, it is likely that the fallout will continue as we grapple with the unprecedented economic shutdown.

However, we are starting to see some positive signs as the painful social distancing steps we have all taken begin to bear fruit and individual states across the country start to slowly open their economies. We believe that there are likely to be additional hurdles to leap as we move forward, but remain confident in our overall toughness to prevail.