THE ANATOMY OF RECESSION
THREE MARKET PUNCHES
1 ) Arrival of the Coronavirus
Cases started appearing in China at the end of 2019.
Confirmed cases outside of China began to appear in January 2020.
2 ) Saudi/Russia Oil Feud
Economic war triggered in March 2020 by Saudi Arabia in response to Russia’s refusal to reduce oil production in order to keep prices for oil at moderate level.
3 ) Government Mandated Shutdown
The US began shutting down non-essential businesses to prevent the spread of COVID.
Lack of business activity forced employers to let go/furlough many employees.
BOTTOMING PROCESS
Reaching the market bottom in a recession is a process, with many ups and downs along the way.
Large bounces are normal during a bear market known as counter trend rallies.
Though we don’t know if the late-March lows will hold, it is believed we are in the consolidation phase to find a durable bottom.
EQUITY POSITIONING
Since the Great Recession, we’ve witnessed growth stocks outperform value stocks.
Cheap debt has given them the ability to expand their business and strengthen their balance sheets.
Large-cap companies have been more resilient in the current recession as they are better capitalized than small-caps.
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