Coronavirus Impact: An Update

Dear Clients and Partners,

Let us begin by offering support and wishes for a rapid recovery to all those who have been medically impacted by the virus, and to their families. We are writing with a short update on U.S. and global market activity.

As you know, the Fed and many other central banks have added massive additional liquidity to the world banking and financial system over the weekend and today. The world’s central banks, led by the U.S., have expanded their already large doses of liquidity to markets, and now parliaments in major countries are adding fiscal stimulus to support the less fortunate, forgive student loan interest, support mortgage lenders, legislate paid sick leave expansions, secure income for those who are unable to work or laid off, and to offer many other fiscal benefits.

We are struck by news reports that seem to ignore the fact that this crisis, like the many crises we have seen in our multi-decade company existence, will eventually pass. We can be sure that this crisis too will pass.

Medical data will be the cause of a change from fear-based activity to normal economic growth.

Clearly, the key for an “all clear” from the panic is for the number of infections to peak and the number of recoveries from coronavirus to begin to rise. Once those data become available, the U.S. and world stock markets will see the end of the panic and there will be a rare opportunity buy great companies at bargain prices. Headlines will drive behavior. The monetary and fiscal stimulus is helpful, but we recognize the virus headlines will trump the stimulus headlines as it pertains to the public fear gauges. One thing we know from history about the nature of markets is that they will bottom before the fear peaks.

In addition to improvements in medical outcomes, we can be sure that eventually there will be a vaccine, and there will be medical treatments to slow the onset, give relief to suffering patients, and create a future where the specter of a large-scale annual return of the virus will not be likely. Of course, there will be a return to a commercial world without panic. It is just a matter of time.

As we have written on several occasions, we began to raise cash for portfolios in January and to add to gold. We are confident that the levels of cash that clients hold will provide resources to buy great stocks at very attractive prices once the medical data show us that the virus will not continue forever. The examples of China and South Korea, where the impact of the virus has diminished, has created a picture that will eventually be seen in the U.S. and the developed world in general.

We welcome your calls and other communication.

Anthony Danaher

Monty Guild