Market Commentary: Down But Not Out

Before a big fight, reporters would always ask Mike Tyson what he thought would happen. The writers always wanted insight on the boxing style of his opponent and asked him to speculate about other guy’s lateral moves, how he danced, whether Tyson expected him to do this or do that, and how he would react. The youngest heavyweight champion in the world liked to talk and he always had a quote for the story. But once he cut the questions off altogether. “Look”, he said flatly, “Everybody has a plan until they get punched in the mouth.”

The man nicknamed Iron Mike and Kid Dynamite had quite a bit to talk about. By the time he was 46, he had racked up 50 wins and 6 losses, defended his title nine times, spent hard time in prison, declared bankruptcy, battled addictions, tried to make a comeback, lost his mother to a stroke and a 4 year-old daughter to a tragic accident. He labeled himself an annihilator and literally changed the game for fans, promoters and boxers worldwide. Back in the day, Mike Tyson was considered the epitome of pain and savagery by many and he left a wide path of fear and broken bones in his wake. This is generally how investors in the financial markets will look upon March of 2020.

The first three rounds of the new decade came to an end on Tuesday. But this is the United States of America and we have by no means suffered a knockout. Not even close. Nevertheless, all of our coronavirus related fears, national containment policies, raging oil battles, and expectations for global recession carry forward into April. And, now that our national shutdown has been extended, we know they will be with us through what we call the cruelest month into May.

Most of us who are not on the front lines of research, medical care, law enforcement, emergency services, national defense — and even the fourth estate trying to report on all of the aforementioned — are still adjusting to the stay-at-home orders and working around employer and school routines and demands, continuing to digest the daily White House Task Force briefings and announcements from state and local officials, closely following the progress of family, friends and neighbors in quarantine or hospitals, shaking our heads at the savagery of the pandemic, and sharing our bucket lists for all the life-affirming things we plan to do as soon as we are loosed from our studio apartments, man caves, and shared kitchen workstations. Case counts increase as expanded testing provides confirmation of the COVID-19 spread as a result of gatherings held a mere fortnight ago.

Governments around the world are taking unprecedented actions to restrict the movements of its citizens as well as those seeking to cross its borders, and this is greatly affecting supply chains, jobs, businesses and the greatest component of our economy: personal consumption. Schools across the globe are closed, factories are being repurposed from autos and whiskey to ventilator and hand sanitizer production, hotels and dormitories are being eyeballed as intensive care recovery sites, the National Guard is being mobilized to build mobile medical facilities, massive hospital ships have been sent to Los Angeles and Manhattan, and the Congress is looking at a fourth massive emergency funding bill. Trillions in direct assistance to households as well as grants and loans to airlines, railroads, and other businesses and needs are en route. And the financial markets respond to the aid, and talk of more aid, with temporary relief rallies that last until uncertainty and need surface again.

We are officially told that, despite all of our precautions and sacrifices, things will get worse in the weeks ahead, peaking in mid-month for some regions, later in others. Our glorious spring and holy days are about to be darkened by jobless claims, lost earnings, more shuttered businesses, widespread illness, and loss. But — optimists and patriots all — we power through these days, cheering for the doctors and nurses and scientists and manufacturers unbelievably hard at work, awaiting their lifesaving treatments, vaccines, protective devices, and cures while we are being advised to prepare, mentally as well as financially, not only for the bad numbers ahead, but for a recurrence and downturn in the fall. We are in between rounds right now, with the loud bells from February and March still ringing in our ears. There is a brief time out before the next bouts begin and volatility has dropped from the 50-year high set on March 16, when the Fear Index spiked to 82.69, topping the most recent high of 80.86 on November 20, 2008 and far from its half century average at 19.25.

U.S. stocks in general just suffered their worst quarter since 2008. For the Dow and S&P 500, they experienced the worst March since the Great Depression. Since January 1, the Dow Industrials Index has fallen 23%, the S&P 500, 20%; the Nasdaq, 14%; and the Russell 2000, best reflecting many of our smaller businesses, down 31%. For a number of reasons, crude oil is down an astonishing 67% this quarter, and gold is up 5%. Baa-rated corporate bonds maturing in 10 years gained 90 basis points to finish March at 4.60% and the major U.S. corporate bond indices suffered losses of 4.05% in 1Q2020. The world’s safe haven, U.S. Treasuries, however, stood strong, produced returns of nearly 9%. The 2-year government yield fell 133 basis points to 0.23%, the 10-year dropped 124 basis points to 0.67% and the 30-year shed 104 basis points to close the quarter at 1.34%. Just one year ago the long bond yielded 2.81%.

In March, municipals had their worst week ever. Investors trying to raise cash and meet margin calls, and institutions unwinding highly leveraged wagers, flooded the market with sell orders at fire sale prices will no distinction made between credits. Liquidity in a market seen as a haven second only Treasuries virtually dried up. During the week of March 18, total par volume sold peaked at $63.5B, the highest since the record selloff in mid-September of 2008. One week later, munis had the biggest price rally in history, a reversal that left traders breathless and investors relieved. By the time all the dust settled on Tuesday, the 2-year AAA municipal general obligation benchmark yield at 1.06% had gained only 2 basis points on the year and was 43 basis points below where it stood only one year ago. The 10-year muni yield fell 11 basis points to 1.33% during the quarter and was 53 basis points below the comparable 2019 level. The 30-year tax-exempt benchmark at 1.99% was 10 basis points below its 2020 starting point and 61 basis points stronger than where it was one year ago. After record-setting outflows in municipal bond mutual funds and with a primary calendar at a virtual standstill, municipal returns fell 3.75% in March. Despite the hottest start to the year on record, muni gains were reversed and major indices ended down 0.68% on the quarter.

Those who lived through the Great Recession know that the challenges we face now are decidedly different today, as are the threats to, and demands asked of, our citizens. Few, if any, comparables exist; some point to the Spanish Flu era and the two world wars for reference points. This pandemic is being viewed as a war different from the ones we once declared on poverty, on drugs, and on terror. It is being fought on two fronts, the one on disease protection and the other on economic protection. Public health officials and central banks have become the generals on the field, endeavoring to assure citizens that health care and financial systems are sound. The Federal Reserve and counterparts around the world have taken steps never before seen to provide for short term funding needs. The Fed acted with lightning speed to slash interest rates to zero, lower the rate that it charges banks for overnight loans, and began purchasing $700 billion of U.S. government and mortgage-backed securities. It relaxed the requirements for deposits that banks must hold as reserves to meet cash demand and increase lending, and is buying billions of U.S Treasuries from foreign sources in need of U.S. dollars. To stabilize a market short of buyers, the Fed is even now stepping in to buy investment grade corporate bonds and will soon start purchasing municipal bonds in the secondary market to ensure liquidity in markets that have never before required such support. All in all, it has been quite an action-packed 90 days for those who generally deal in more contemplative pursuits.

HJ Sims would like to let you know that we stand along with you, your families, your small businesses, employees and families during these challenging times. We encourage you to reach out if we can be of assistance directly or in referring you to other resources that may offer meaningful support. In the meantime, we invite conversations about your banking and financial needs, changes in your risk tolerance, interests, and goals. Over the course of our 85 years in the business, we have worked to attract an amazing array of talent that is available to serve you, our partners. In extraordinary times like these, we learn together, grow together, support each other, and celebrate our many day to day successes, small and large.

Generations at Shalom Park

Generations at Shalom Park represents a collaboration between Shalom Park, a culturally Jewish mixed-use development in the Charlotte, North Carolina metro area, and Aldersgate Life Plan Services, Inc., a well-established Charlotte-based non-profit Methodist organization currently operating an existing life plan community and home care agency.

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LeadingAge FL 2020 Annual Convention & Exposition

Attendance: Tom Bowden, Melissa Messina, Kerry Moynihan

Virtual Exhibitor

Gold Sponsorship

Education Session: Board Engagement: Scenarios of Strong Fiscal Governance
This session will provide information on best practices related to board governance and how it impacts your organization.

Learning Objectives:

  • Review the qualities of strong board governance and identify opportunities to bolster an organization’s current board
  • Identify the ways in which strong board governance fuels the  financial strength of an organization
  • Contrast the tales of two organizations and how their Boards’ decisions greatly impacted the ultimate standing of each organization

Speakers: Melissa Messina, Senior Vice President, HJ Sims and Wesley E. Finch, Founder and Chairman of The Finch Group and the current Treasurer of the Board of Managers of Toby & Leon Cooperman Sinai Residences of Boca Raton

An Update on COVID-19 (Coronavirus)

As news on the coronavirus (COVID-19) continues to unfold following the declaration of a national emergency, we wanted to stay in touch regarding key details as well as how we may assist you during this unprecedented time. We also recommend following the Centers for Disease Control and Prevention (CDC) and World Health Organization (WHO) for the latest information.

In addition to previous recommendations regarding vigorous hand washing for at least 20 seconds and staying home when feeling ill, recent recommendations have centered on “social distancing” and “flattening the curve.”

Designed to slow down the spread of the virus, social distancing is a public health practice that involves staying at least six feet away from others and avoiding handshakes, hugs or other forms of physical contact. With the aim of preventing the public–-including those who are not yet showing symptoms-–from spreading COVID-19 or other illnesses, it also entails cancellations and closures, as evidenced by the number of school closures and event cancellations. As of March 15, the CDC recommended that gatherings of 50 people or more be avoided for the next eight weeks—it is important to realize this may change by publish date of this article as this is a very fluid situation.

To that end, social distancing can help flatten the curve or reduce spikes in the number of new coronavirus cases, which can stress an already taxed healthcare system. A flattened curve can decrease the spread and lead to better health outcomes for those who do fall ill.

If you are concerned about your investments and the recent market fluctuations, please reach out to your HJ Sims financial advisor at any time. Our team recommends diversifying and investing for the long-term, and we are happy to discuss individual strategies.

Finally, while it is important to stay informed, too much news can also be overwhelming. Do your best to take breaks and take care of yourself.

We want to hear from you

Do you have a topic suggestion for an article in a future issue of Sims Insights newsletter? We would love to hear from you. Share your ideas here.

 

The material presented here is for information purposes only and is not to be considered an offer to buy or sell any security. This report was prepared from sources believed to be reliable but it is not guaranteed as to accuracy and it is not a complete summary of statement of all available data. Information and opinions are current up to the date of publication and are subject to change without notice. The purchase and sale of securities should be conducted on an individual basis considering the risk tolerance and investment objective of each investor and with the advice and counsel of a professional advisor. The opinions expressed by Ms. Morrow are strictly her own and do not necessarily reflect those of Herbert J. Sims & Co., Inc. or their affiliates. This is not a solicitation to buy or an offer to sell any particular investment. All investment involves risk and may result in a loss of principal. Investors should carefully consider their own circumstances before making any investment decision.

Prevention of Coronavirus

With coronavirus or COVID-19 spreading to more cities, states and countries, awareness and concern also continue to grow. No matter where you live or what your age, it is important to take steps toward protection.

Following are several simple steps you can take to prevent illness and bolster your health:

  • Wash your hands for at least 20 seconds. Even regular hand washers often miss this mark – 20 seconds is about the time it takes to sing “happy birthday” twice. Determine a song of your choice or follow the second hand on your watch to ensure you are washing with soap and warm water for at least 20 seconds. If soap and water are not available, you can use an alcohol-based hand sanitizer that contains at least 60 percent alcohol.
  • Avoid close contact with anyone who is sick, no matter what the illness. If you are caring for someone who is sick, try to wear a mask. The CDC only recommends masks for those who are ill or caring for someone who is sick. Stay home if you feel unwell.
  • Avoid touching your face, particularly your eyes, nose and mouth. Also, avoid shaking hands for the duration of the virus.
  • Clean and disinfect surfaces regularly – this can include commonly touched areas such as doorknobs, light switches, computers, handles, phones, bathroom sinks, counters, toys and more.
  • Take care of your mental and physical health. Make sure you are eating well, drinking plenty of fluids, exercising and doing something to relieve any stress you may feel regarding the virus. Limit screen time, particularly if you find yourself getting overwhelmed by news or social media messages.

With symptoms including fever, cough, shortness of breath and body aches, coronavirus can be confused with influenza. Please contact your doctor’s office with any concerns.

To prepare your household, you can gather a two-week supply of non-perishable food staples and household supplies such as toilet paper, laundry supplies and diapers. It is also recommended to have at least a 30-day supply of prescription medications and other common health supplies (cold medicine, pain relievers) on hand. You may also want to create a plan in case of closure at work, daycare or school.

In addition, you can visit the Centers for Disease Control and Prevention (CDC) site for ongoing updates and information.

We want to hear from you

Do you have a topic suggestion for an article in a future issue of Sims Insights newsletter? We would love to hear from you. Share your ideas here.

 
The material presented here is for information purposes only and is not to be considered an offer to buy or sell any security. This report was prepared from sources believed to be reliable but it is not guaranteed as to accuracy and it is not a complete summary of statement of all available data. Information and opinions are current up to the date of publication and are subject to change without notice. The purchase and sale of securities should be conducted on an individual basis considering the risk tolerance and investment objective of each investor and with the advice and counsel of a professional advisor. The opinions expressed by Ms. Morrow are strictly her own and do not necessarily reflect those of Herbert J. Sims & Co., Inc. or their affiliates. This is not a solicitation to buy or an offer to sell any particular investment. All investment involves risk and may result in a loss of principal. Investors should carefully consider their own circumstances before making any investment decision.