June 16, 2020
How Do We Turn the Lights Back On? June 15, 2020 By Mitchel Anthony The financial markets have roared back 30 to 40% from pre-virus correction levels but have begun to struggle to move higher as investors assess the outlook for the US and global economies. The US economy has lost considerable ground and does not appear to have found a bottom yet. While the US economy is not roaring back to life like the equity markets, positive economic signs do seem to be on the horizon. This economy had been in an extended period of slow growth and we were likely only in the fifth or sixth inning of this ballgame when the virus hit. Now it is unclear whether the remaining innings will be played and we will get the lights back on the game or whether the game will be called because of the storm that has hit. Despite this investors have become optimistic and liquidity has returned to the equity markets. This recovery in the financial markets has been largely driven by strong messages of support for the US consumer and US business from the central bank, the U.S. Treasury, and the U.S. Congress. The Fed has said that they will use all tools available and will provide whatever liquidity is needed to the U.S. Treasury and the financial markets to avoid a collapse in the economy and attempt to ensure a quick recovery from the effects of the government ordered shutdown. Washington politicians have basically made the same statements. As a result optimism has abounded as the Fed has never been unsuccessful in the past.Read moreEquity Markets Nosedive as the Plug Is Pulled On the Economy
April 17, 2020
By Mitchell Anthony April 10, 2020 The S&P500 fell 19.6% in Q1 2020 compared to a loss of 11.1% for MACM’s Dynamic Growth Non-Qualified portfolio. The US Economy has deflated after orders from Washington and the States as the coronavirus rips its way across America and the globe. The US economy was unplugged just as stronger growth was beginning to emerge after a long period of modest growth since the great recession. Indeed pre-virus economic trends in the US economy were quite good. Housing was experiencing some of the best data it had seen in many quarters. Consumer spending on housing, digital devices, and experiences was accelerating. Energy prices were stable and the Fed’s balance sheet was declining. Employment was at all-time highs and mortgage delinquencies at all-time lows. Consumer confidence was near all-time highs and consumer balance sheets were strong. The banking system was solid and corporate America had healthy balance sheets. There was no overcapacity in the economy and asset prices were higher across almost all asset classes. So in other words a very bad time opportunistically to have shut down the economy.Read moreCoronavirus Forces Hand of Government Leaders
March 19, 2020
March 18, 2020 By Mitchell Anthony Unfortunately this virus and its ability to spread and penetrate the globe was misunderstood by us and by most investment managers worldwide. While the world watched selective footage of the virus grip China it was unclear what was being done in China to prevent and contain the spread of the virus and how America would have to react if the virus reached American shores. Historically coronaviruses that began in China never reached the rest of the globe in a significant manner. However this time the virus has spread quickly across the globe and threatens human life. As a result the globe has taken a very defensive posture against the virus. Government and corporate leaders across the globe have had to weigh the impact of the virus on human life versus the impact of extreme defense measures on economic activity. Thus far economic survival has fallen and given way to maintaining human health around the globe. Historically capitalists have sacrificed sometimes almost everything including health for economic and financial gain and prosperity, however in today’s world capitalism has fallen in rank dramatically to our current society’s goals about life and health for humanity. Read moreCoronavirus Update
March 10, 2020
The risk of recession continues to rise and as the risk plays out equity markets fall and treasury markets rally. Stocks generally have fallen almost 20% from their all time highs achieved just a few weeks ago. Conversely 30 year treasuries have risen almost 15% during that same timeframe as record lows in interest rates are embraced. The 30 year treasury is now yielding less than 1% and 10 year treasuries are yielding approximately 1/2 of 1%. If the fear of recession turns into reality treasury yields will undoubtedly move into negative territory across the yield curve and equity prices will possibly fall another 10 to 20%. Gold has not turned out to be much of a hedge for this recent drop in equity prices. While gold has done well at times historically during periods of fear gold has now become a bit more of a commodity used in jewelry and hence tied to economic strength. As recession is embraced investors are less thrilled with gold. Treasuries are a much better hedge for inflation then gold it would appear.Read moreIs the Coronavirus (COVID19) just creating Market Volatility, or is this the End of the growth phase of this Economic Cycle
February 28, 2020
The steady rally in equity markets that we have enjoyed for over 12 months may have come to an end. Our current rally began in January 2019 after our last correction that occurred in October 2018. The S&P 500 has declined approximately 11% from its all-time high achieved just a few weeks ago. Volatility has risen to the highest level in several years over the last two weeks. Has the rally just paused or is this the beginning of a more significant correction as investors discount the likelihood of the growth phase of this economic cycle ending because of the impact of the coronavirus. We highly suspect that this is not the case! However, we cannot ignore the unknowns that exist with this highly infectious virus that has not proven to be very deadly, but is a threat to people who already have respiratory distress. The last time we had a coronavirus in the globe was in 2003 with SARS. It began in China as well and mutated from animals very similar to this virus. The SARS virus caused little if any damage to the global economy or the American economy and burned itself out within six months. SARS had a much higher death rate and was also very infectious but never spread to a vast part of the globe. We have had other viruses over the years that were deadly but have never shut down or changed course of the global economy. SARS, MERS, Swine Flu, the list goes on…Hopefully this will just be another one that is added to the list of viruses that burned himself out before they ever damaged the US economy.Read more