Estimates for 2Q GDP growth are ratcheting down and a 10 percent contraction is not far off from the consensus. Initial unemployment claims could reach 1 million next week. If policymakers get this wrong, contagion can easily spread, despite the temporary nature of the coronavirus. In that context, Congress is rushing to get a $1 trillion plus stimulus passed in the coming days. Senate Republicans released their plan last night. There are large differences between the goals of the two parties, b… View More
After listening to Governor Newsom’s “stay-in-place” decree last night, we had a lengthy discussion about the impact of a total lock down on California, the market and our expectations for it. During that discussion, we talked about the emotions elicited by both market gains and market selloffs. A key observation was that it easy to buy into a jubilant market, but it can be difficult to remain invested during a significant market draw-down. Below is a chart of the Dow Jones Industrial Ave… View More
We spent last week warning policymakers about the urgency and magnitude of the economic fallout from the coronavirus. To be fair, Congress will always lag market participants, and politics constrains a quick response. But the gap was so wide between financial market participants and policymakers that we were deeply concerned. Exactly one week ago today, the consensus view in Congress was to take a wait-and-see approach. But as we all know, once the slowdown hits the data, we are too late. Financ… View More
Markets across the globe sold off last week as the coronavirus spread to over 125 countries and oil prices reflected last week’s failed OPEC+ negotiations. The markets gyrated wildly last week: for example, the Dow Jones Industrial average lost 2,013 on Monday, gained 1,167 on Tuesday, lost 1,464 on Wednesday, lost 2,352 on Thursday and ended the week with a 1,985 gain on Friday. Thursday’s selloff was the worst since October, 1987. Last week, all of the major indices entered a bear market (… View More
There are a couple of topics we want to discuss this morning; the risk of market timing and the Fed's actions overnight. With respect to market timing, we understand the temptation to try to time the market, but moves like Friday's help demonstrate exactly why we should not. There will be up days and up periods that investors will miss, and missing those periods will have a negative impact on investor returns. In looking at the last 25 years of the market's data, we found that if an investor ha… View More