July 23, 2020
We hope this letter finds you and your loved ones healthy and safe. We at Glenview Trust have been extremely fortunate with minimal health impacts from COVID-19, and our business continues to operate well while most of us are still working remotely. In the office, we continue to follow the CDC’s recommended best practices by social distancing, limiting the number of employees in the office and face-to-face meetings, and sanitizing our office spaces frequently.
As one well-known bank CEO said recently, “The word unprecedented is rarely used properly. This time it’s being used properly.” We agree. The COVID-19 pandemic has impacted the world in so many unprecedented ways it is impossible to grasp them all.
After almost flattening the curve in the U.S., reported cases of COVID-19 began rising again as states started reopening. Even though unemployment numbers have come in better than initially expected, the unemployment rate is still above 11%, a level last seen during the Great Depression. At the same time, an outbreak of racial tensions led to widespread protest demonstrations, with many resulting in rioting and looting.
Oddly enough, with all the negative news and a sharp decline in parts of the economy, equity markets made up nearly all of their 35% first-quarter drop, pushing the S&P 500 slightly higher than where it started the year. How, with all the disturbing headlines and issues our country is facing, could stocks be positive for the year?
One possible reason lies in an old market adage; “Don’t fight the Fed.” In February, when the seriousness of COVID-19’s economic impact started becoming apparent, The Federal Reserve and U.S. Congress took unprecedented steps to stimulate spending and instill confidence in credit markets, the underpinning of our economy. While similar to operations employed during the housing market crash in 2007-2009, the Fed acted much faster this time, leading many investors to expect a shorter recession and quicker recovery for the economy and markets.
We don’t know how long this will continue, or which way equity markets will go from here. However, since the selloff in February and March, market volatility has risen. As the election nears and attention shifts toward those battles, we expect increasingly combative political rhetoric to usher in further volatility spikes.
For the last couple of years, we suggested updating one’s risk tolerance and asset allocation. As unpleasant as it was, the COVID-19 induced market plunge gave all of us a top-of-mind review of how our emotions react to a gut-wrenching market correction. Now that we’ve seen this rapid snapback in stock prices, we believe another excellent opportunity exists to consider whether our asset allocation matches our risk tolerance, and if not, to make any necessary changes.
At Glenview Trust, we remain committed to helping you navigate these challenging and volatile times. We will be updating our website (www.glenviewtrust.com) any time we have new information about the company, or COVID-19 and the markets. You will find our notes and other perspective pieces and company news, by clicking on the “Glenview News” tab at the top of our homepage. Please do not hesitate to call any one of us if you need anything or would just like to talk.
Thank you for your continued trust and confidence.
The Glenview Trust Company