BY: JOHN McCOLLUM, CFA
Chief Investment Officer / Argent Trust Company
It’s been a long couple of weeks.
We’ve been presented with a series of events and now face current circumstances that previously had been difficult to imagine. What seemed perhaps unimaginable two weeks ago, for example, the cancellation of in-person classes at schools and universities around the country, has been met with remarkable adaptability. Restaurants forced to shut down have developed effective pick-up and delivery strategies within days. Businesses are figuring out how to accommodate remote workers. Even hospitals are figuring out how to expand the capacity of their respirators which are expected to be in demand. We will see how people react and adapt to the state-wide lockdown orders recently announced. It’s not perfect by any means, and not every business can adapt. We know the next employment report will indicate the reality of the many businesses which have laid-off employees.
This pandemic has arrived with alarming speed and already inflicted great pain. The pain, initially, has been caused by both voluntary and government mandated actions intended to delay, and in some areas perhaps prevent, the worst direct impacts of the coronavirus pandemic. Overall, our investment decisions throughout this period have been predicated on the idea that despite a period of extreme economic disruption, somewhat normal business conditions will re-emerge in coming months. Over longer periods, there is no reason to believe that economic activity will not resume its normal pace (with the normal periodic ups and downs).
There will continue to be tremendous government provided support to businesses, institutions and individuals. We have seen encouraging signs so far of the beginnings of this support. The Federal Reserve has cut short term interest rates to zero and implemented or re-started several programs designed to ensure stability in financial markets, especially in some of the areas less publicly visible but critical to normal functioning of markets. The IRS provided the option to defer for 90 days filing and final payments for 2019 tax returns. Congress is working on a bill to provide significant direct relief to those affected by job losses. There will almost assuredly be more to come. We are also beginning to see creativity and innovation, and even some signs of sensible reduction in various rules and regulations as the nation adapts to the realities of slowing the spread of a pandemic.
Markets, at times, have seemed to expect the worst possible outcome. At a time when the fear of the solution is in some ways worse than the disease, we have all been testing and questioning our assumptions. However, throughout all of this, we continue to make changes to investment portfolios when we think we can benefit from what are extreme and judged to be unwarranted short term changes in securities prices.