Insights

Regarding the Covid-19 Coronavirus

February 28, 2020

As the outbreak has turned into a global threat, countries are imposing travel bans, canceling public events and quarantining millions of people to slow the spread of the virus. Experts are describing a pandemic - a new disease that spreads around the world. "When several countries have widespread transmission, then spillover to other countries is inevitable," said Anthony Fauci, head of the US National Institute of Allergy and Infectious Diseases. "One cannot shut out the rest of the world."

People and financial markets are in crisis mode and will remain so until it is better understood how quickly the virus is spreading and how it should be treated. While efforts are underway to find a vaccine, that is a process that is expected to take a year or longer. The immediate challenge for the medical/scientific community appears to be finding effective treatment for those showing symptoms. We have confidence that progress will be made and that it will reassure the nervous markets.

For more, see this Feb 24 story in The Atlantic:https://www.theatlantic.com/health/archive/2020/02/covid-vaccine/607000/

It's clear that the virus is also a threat to our financial health. The experience gained from surviving past market panics is relevant because fear drives people to act irrationally in times like this. But health unknowns of such magnitude make assessing potential economic and market ramifications an ongoing exercise. For now, it's enough to say there is a wide range of possible outcomes.

Our focus is not on the losses of the past week. It is about what might happen over the next week or weeks.

The economic impacts on individual businesses will range from minor to major - transactions that are briefly postponed, a drop in sales followed by a resumption of previous activity, to the unfortunate scenario where a business is diminished well into the future. Grocery stores should suffer little compared to cruise ships. Our investment approach emphasizes business fundamentals - we are busy now evaluating how factors such as current cashflow, future growth and risk measures may in some cases be changing for portfolio holdings. We expect that "knowing what we own" will matter as the panic subsides.   

With the current and coming reduction in economic activity, the overall stock market is worth less today than it was a few weeks ago. What matters is the human tragedy. Many will remain fearful until we learn more. While we wish we could soothe away some of that stress, the best we can do is promise to keep our eyes open and our hands on the wheel throughout the crisis.

Now is a good time to take steps to help keep yourself and your family safe and as minimally inconvenienced as possible in the event our daily routines are interrupted.  

We recommend the following article for some practical advice:https://www.npr.org/sections/goatsandsoda/2020/02/26/809650625/a-guide-how-to-prepare-your-home-for-coronavirus