It was the best of times, It was the worst of times
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”
Charles Dickens could have been writing about what we have seen in the stock market and the economy in the past few weeks and months. A breathtaking 30%+ drop in global stock markets in a record short time and a strong rally back to within sight of all-time highs. Mortgage applications are up for the 6th straight week and have grown over 8% in the last 12 months while over 4.5 million homes are now in forbearance. It’s enough to make your head spin if you let it, the key is not to let it.
As a research and process-driven firm, we try to focus on the fundamentals of the businesses that we invest in. This allows us to keep a rational head when news creates volatility in the markets. We all understand why being rational and composed is important, we just lived it. The historic market drop was one of those times where investors who had a process did well, and those who didn’t did not.
This gets me back to the fundamentals and trends that we can see that are going on. We are starting to see a few green shoots. For the first time in months, we are starting to see more airline bookings than cancellations. Table reservations for restaurants are picking up and miles driven has gone up the last few weeks in the US. We still have 575 counties on lockdown but that is way down from 2600 we had just a few weeks ago. Walt Disney World has finally announced a reopening date as well, July 11. These are good signs that although we have some tough months ahead, we are starting to see small signs of economic normalcy.
For our part, we have continued our program of slowly reentering the market. Our belief is still we are going to see some significant turbulence in the weeks and months to come. There will be some setbacks and uncertainty related to Covid-19, the reopening of some areas of the country, and certainly some issues regarding our relationship with the second-largest economic power in the world, China. These issues and the political rhetoric surrounding them will provide us some opportunities for different entry points over the next month or so that we are looking forward to. This high level of uncertainty is one of the primary reasons we have continued to hold a number of defensive positions, including gold.
We continue to advocate for all of you to get out of your houses and enjoy the outdoors and for those of you who are able, a meal, a drink or an ice cream cone at a local venue. Trifles make the sum of life.