Insights on Recent Market Events March 18, 2020

Market Update From Neal Owen,

I have been working with clients and their life savings for a very long time. I started in 1982, witnessing interest rates rising to record highs (18 to 20 %), Black Monday (Dow dropping 23% in a few days), The savings and Loan Crisis, Iraq invading Kuwait, The Asian currency and the Russian financial crisis, The Y2K scare, The Dotcom crash, The 9-11 terrorist attacks, The Iraq war, Hurricanes Katrina and Rita, The Sub Prime Mortgage crisis, The Eurozone debit crisis, The Fiscal cliff worries and most recently, Brexit.

Market Update

Unlike those previous bear markets, this has been unprecedented. Over a one-week period, the market decline paralleled the crash of 1929, 1987 and 2008. The market moves have been extreme with realized volatility of roughly 7.5% move a day.

All major sustained market down turns and recessions in my career have been triggered by an event the markets did not anticipate (ie. Covid-19). Normally, recessions are triggered by an enlarged imbalance in the economy such as too great of an investment in housing (2008), Technology (2001), or commercial real estate (1990). As a result, the duration of a recession normally depends on how long it takes to correct the imbalances. This economic contraction is not driven by imbalances in the economy, but rather the massive shock that comes out of no where (Covid-19). Similar to the stimuli packages provided during the 2008 crash, Central banks have recently unleashed unprecedented policy actions to support the economy which should help stabilize the markets. I do believe, there will be more to come.

Governments have taken drastic actions and measures including border closures, ordering business and schools closed and asking people to work from home all in an attempt to slow and stop the spread of the Covid-19 virus.

I believe that as we begin to recover, there will be permanent changes that will affect our world including the way business is done. Companies will be reassessing office space requirements, retailers will assess the number of physical stores they require. Business travel urgency will be reassessed. I believe the move to the re-platforming of technology, digital transformation of companies, cloud computing, cloud-based video conferencing, on line retailing, marketing and internet banking trends will accelerate.

Ordering your groceries online and having them bagged and ready for pick up or delivered will become common place moving forward. More restaurants will have takeout and delivery services. There will be a move from high end restaurants to prepare fresh premade frozen food that will be available in the local grocery stores or on line and companies like Uber Eats will spring up to fill the void in delivery service.

As this crisis wanes, there will be a once in a generation opportunity for those who align themselves with professional money managers that can properly assess the long-term fundamentals of businesses.

I have no medical training and I will not speculate when or how this virus will end.

My advice to you is hold your positions, add new money now if you can, and most importantly stay safe, listen to the medical experts and if you can, look out for your neighbors.

Warm Regards,
Neal Owen

Neal Owen

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