Someone somewhere was the first to say, “Hope is not a strategy.” Now, that is true in all walks of life, but especially in investing. You can’t hope the market will go up. You can’t hope your portfolio will provide an adequate rate of return. You can’t hope you will have enough to retire on. You, me, all of us, need to plan appropriately when it comes to investing, to invest what we need to meet our long-term objectives and invest that capital in a thoughtfully constructed portfolio that should deliver the maximum rate of return for the level of risk we are comfortable taking. With that said, we are living through an unusually scary period as the COVID-19 pandemic impacts our people and our economy in an unparalleled manner. As such, we think a bit of hope is not only appropriate but necessary. Below are four things we hope will come to pass that could meaningfully mitigate the impact of the ongoing healthcare and economic crises:
- The price of oil bounces – the price of oil collapsed due to a COVID-19 driven drop in demand and a production war between Russia and OPEC. While lower oil, and gasoline, prices are a tailwind for the US consumer, the drop in price is hurting the very significant US oil and gas industry. A bounce in price would help the US oil patch and push up inflation, which would also be welcome. A hoped-for Saudi/Russia agreement on a cut in production pushed the price of oil up a record 24% on April 2, 2020.
- Companies step up – US companies are in fantastic financial shape, with many in a position to prevent some of the financial pain American workers would be expected to experience during the coming economic slowdown. To that point, Comcast set aside $500 million to pay the salaries and benefits of workers impacted by COVID-19, as opposed to laying off those workers.
- Expedited government relief – the Federal Government is trying to push out $2.1 trillion in economic aid to states, businesses, and workers – an unprecedented amount and administrative undertaking. The quicker that aid reaches those in need, the less meaningful and less severe the impact of the COVID-19 driven slowdown.
- COVID-19 testing and treatment – it is worth remembering that a significant amount of capital – intellectual and financial – is being directed at containing, treating, and curing COVID-19. We know the news will get worse before it gets better, but it will get better. Last week, Johnson & Johnson announced a vaccine candidate it hopes will be available by early next year, and Abbott Laboratories launched a rapid test kit. After a slow start, the US is conducting 100,000 COVID-19
Tagged: market perspectives, weekly wire, Tim Holland, COVID-19, oil pricing