USA All the Way
Written by Steven Bouchey
USA All The Way !!!
We haven’t owned any developed international holdings in quite some time and we have been underweight emerging markets for the past couple years. This week we made the decision to sell completely out of our emerging market holdings because of the uncertainty surrounding these countries’ ability to fight COVID-19 without the resources and health care systems of countries like the US. We feel that emerging markets could suffer an economic crisis much worse than other countries around the world. China is usually one of the largest weightings in emerging market ETFs, and supposedly they have turned the corner with this virus, but once again we are skeptical of how accurate the data and information may be so we feel it’s better to be safe than sorry. As much as China says they are opening back up for business, today Dr. Fauci stated that it’s ‘mind boggling’ how their wet markets are still operating, this may be where it all began but will we ever know? Let me say that this is a judgment call on our behalf, one where we may be right or wrong, but it’s one that we feel comfortable waiting to see how the coronavirus plays out in third world economies and/or if it will rear its ugly head again. USA All The Way !!!
The projected numbers are numbing to say the least, as of today we have over 1M cases worldwide and 59K deaths, in the US almost 275K cases and more than 7K deaths. If Dr. Fauci and his medical team are correct, the conservative estimate is 100K deaths and could be as high as 240K deaths in the US alone. Our country has the ability to take care of sick patients, think about countries like India with 1.3B people or Brazil and so many other countries who will struggle to take care of their people. How will those countries contain this virus?
Today’s jobs report showed for the first time in ten years where we had a monthly decline of over 700k jobs and when the revised number comes out next month, this may be too conservative. The survey is done mid-month and most States didn’t start locking down until after May 15th so there could be many more not accounted for. Next week is the beginning of earnings reports being released and we will see how Corporate America fared during the first quarter, my guess is that if they have any profits at all, they will be minimal at the very least. Consumer confidence this week was lower than last month, how could it not be. My guess is that the US is already in a recession and there is a global recession happening as well.
For now, we made the decision to only own US equities and when we decide to reinvest the cash proceeds from taking risk off the table not only today but from a few weeks ago, we will invest in holdings that we deem to be sensible. markets gave a little back this week with S&P 500 off -2% but the Nasdaq 100 (QQQ) was only down -0.80%. These are two of our core positions and I am glad that we look at Nasdaq as importantly as the broad stock market.
We have protected clients who take money our products their portfolio by setting aside 1 – 2 years’ worth of what they withdraw and all investors should do the same. Investors who need money over the next year or two, shouldn’t get greedy and have it invested in the stock market because there will be another correction, bear market or recession, its not IF.
I don’t want to sound like a ‘Debbie Downer’, in all the thirty plus years I’ve helped manage our clients’ wealth, I have never been this cautious. With all the unknowns that we are facing, my team and I feel this is a prudent strategy to be proactive by taking risk out of the portfolios. In the meantime, this is when we feel ‘cash is king’ and we are okay sitting on the sidelines with more cash than we normally hold. Please know that when investors start to reinvest their cash, they probably won’t get in at the market bottom unless they are really lucky. The best time to invest in stock markets is when there is so much capitulation and ‘blood in the streets’ that it will feel uncomfortable, when everything is on sale and deeply discounted.
This stock market will recover from this and go on to make all-time highs, it always has and there is no reason to believe otherwise. As my 105-year-old client told me this week, “Stevie, I was born in 1915 and lived through the Spanish Flu of 1918, the Great Depression, World War II and all other Post WWII events and tragedies, I will survive this one as well.” She actually doesn’t turn 105 til next week, and I call her every year on her birthday to see how she is doing and if she is going to have a glass of wine, she always tells me it’s her b’day and she may have two glasses. Now if this isn’t the spirit and words to live by, then I’m not sure what are. In hindsight, this fast and furious downward slide will feel like a bad dream but one we will wake up from.
Let me finish by saying that Dr. Fauci is my new hero, at 79 he only sleeps four or five hours a night and is staunch with his messages, he steps up to the podium and gives us bad news and we believe him, we trust him. I may put a picture of him on my nightstand I respect him so much. Let’s hope that he stays healthy, because “In Dr. Fauci We Trust.”
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Stay healthy, positive and please keep your family safe.