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 more
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 more
