April 17, 2020

The coronavirus COVID-19 pandemic continues to decimate lives globally and stricken economies and financial markets. What began as a health battle has rapidly become an unprecedented financial and economic crisis. Governments and central banks continue to pour unfathomable amounts of funds into supporting businesses, families and financial markets, yet the economic projections remain at best dismal.

 

Apart from the devastating illness and deaths, one of the most telling factors is sure to be the rapidly rising levels of unemployment and the crash in household incomes as social distancing, particularly stay at home enforcements lead to the closure of enterprise on a mass scale.

 

This is not a structural crisis, yet it will inform and drive some structural, long term changes in the way we work, provide healthcare, support the poor and educate, to list a few. What separates this crisis from the last is that this was not driven by any segment of market players like extravagant bank lending policies or dealers aggressively pedaling overly sophisticated repackaged credit-based securities. Banks are strong and well capitalized, investors are more insightful and credit remains available to small businesses.

 

With that, we are poised for a vibrant recovery once we get the better of COVID-19, except demand will not rebound at pace. It will take some time to unwind the practice of social distancing and fill sporting arenas, concert halls, malls, mass public transport, construction sites and even offices.

 

For now, there has been a rebound in financial markets thanks to the efforts of governments. Equities, which at their worst were down over 30% year-to-date, have cut those losses in half, with the Dow Jones down 17.52% and the S&P 500 down 13.35% YTD. Over the past month, these indices have risen 16.59% and 10.69% respectively. Internationally, the rebound has been weaker with the UK FTSE up 9.89% month-on-month, and down 22.87% YTD. US technologies and healthcare sectors continue to be supportive, and are down just 2.95% and 2.85% YTD respectively.

 

With demand obliterated, even OPEC’s agreement to make record production cuts has been unable to stem the fall in the price of oil. At $18.94 per barrel, oil prices are down 29.72% month-on-month, and 70.16% YTD. This price cannot support the economies of many oil producing nations.

 

Through this crisis, J&T continues to focus on an extended time horizon, understanding value and asset alloca-tion, as we position portfolios to take advantage of investing opportunities as they arise.

 

With our entire team currently engaged remotely, we remain confident that all critical business functions will continue to operate, and there will be no disruption in our ability to serve our clients. We will continue to com-municate openly and be fully accessible to you. We encourage you to write or call us at any time.

 

We will continue to issue further updates as the situation unfolds. Please be safe, you and your loved ones.