Post On: March 20, 2020
As the week comes to an end, several states have mandated business shutdowns and other measures to combat the spread of COVID-19. The winds of change continue to blow for all of us, and the markets are no exception.
Bonds, which are typically “safe havens” for investors during times of trouble, are beginning to exhibit abnormal behaviors. Supply and demand dominates the bond market. When the stock market is down, more people want the high-quality and safety of bonds. As such, the interest rate (yield) paid goes down, because a higher rate is not needed to attract bond investors. When investors don’t feel that bonds are “safe enough,” however, they consider cash as a better alternative, and yields must rise to attract investors. This is beginning to happen, which creates further panic in the markets. This is why central banks, including the Federal Reserve (the Fed) and European Central Bank (ECB), are intervening with quantitative easing to provide liquidity and stability to the markets.
Meanwhile, such news is not helping stock markets find their way towards a bottom. Rough seas like this are very painful and unnerving. We remain in a time of uncertainty, and, as we have seen, the markets don’t like uncertainty! With these developments, we are reminded of how our faith can be challenged in times of distress. Our reaction is nothing new. Remember the story in Matthew 14:
“Then Peter got down out of the boat, walked on the water and came toward Jesus. But when he saw the wind, he was afraid and, beginning to sink, cried out, “Lord, save me!” Immediately Jesus reached out his hand and caught him. “You of little faith,” he said, “why did you doubt?”
When our focus is on the day-to-day movements of the world and markets (wind and waves), we too can start to sink. Remember, we serve a God is who is mightier than our circumstances, and despite all the turbulence around us, there will be light at the end of this journey! This week, some light began to show in the distance.
There are several drug manufacturers currently testing and fast tracking potential cures for COVID-19. Of particular note, one from France is showing some promise! A decades-old malaria and autoimmune drug has successfully treated several patients with COVID-19. In the clinical trial that took place, all of the patients who were treated with the drug tested negative for the coronavirus within six days!**
Treatment trials of this method are now expanding, but this potential remedy will need FDA approval before it is used here in the United States. However, these early results are very encouraging and provide some hope. Now, the question becomes if this light is simply the eye of the storm, here in the US, or if we are truly seeing a bright horizon. Whether this, or one of the other treatments, ultimately proves to be the solution, we are confident that containment of the virus is on the horizon. Timing is everything, and the markets know it.
Speaking of timing, spring is upon us. Researchers have found that heat also kills the disease, and warmer weather should help lessen the spread of COVID-19. At Ambassador, we believe the medical community, with some help from the weather, will bring this crisis under control! Client portfolios currently contain leading edge healthcare and life sciences companies that seek to have a positive impact on the world around us. Many of these companies are working on cures for diseases like COVID-19.
Soon, this unforgettable chapter in world history will be behind us, the markets will be back on solid footing, and, Lord willing, we’ll weather this storm with fewer casualties than anticipated. Continue to prioritize your focus, keep a long-term horizon, and don’t sink just because of the winds and waves around us.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions. Information has been obtained from sources believed to be reliable and are subject to change without notification. The information presented is provided for informational purposes only and not to be construed as a recommendation or solicitation. Investors must make their own determination as to the appropriateness of an investment or strategy based on their specific investment objectives, financial status and risk tolerance. Past performance is not an indication of future results. Investments involve risk and the possible loss of principal.