Opening Statement from the April 2020 Intelligent Investor (part 1) 

Opening Statement from the April 2020 Intelligent Investor (part 1) 

Originally published on April 9, 2020 (pre-market release)

To remind investors how fast things have changed, we have posted some excerpts from the February 2020 Intelligent Investor Opening Statement (published February 6, pre-market)…

Most likely, stock market volatility due to the Coronavirus drama is not yet finished…the potential for higher levels in 2020 for the market indexes remains relatively high given...On the other hand, excessive stock valuations have created a possible scenario whereby it might not take much for the market to enter into a strong correction. <- The stock market made new record highs through mid-February, but then entered a strong correction, which later progressed into a market collapse.

On March 15 from the March 2020 Dividend Gems…

Even though the panic surrounding the Coronavirus outbreak is not justified, it’s going to take a large toll on the economy and stock market…Combining all of the adverse consequences of the Coronavirus hysteria, we believe earnings estimates will get crushed from current levels…The main concern...is that the Coronavirus outbreak is in its early stages, so it’s likely to get much worse, especially in the United States. This has dire implications for the economy and capital markets. <-A few hours later the Fed announced a 100bp emergency rate cut. Two weeks later Washington passed a $2.2 trillion stimulus package.

Overview

As first discussed several weeks ago, we expect to see global economic data that’s “off the charts.” Even with the recent $2.2 trillion stimulus package passed by Washington on March 27, we do not think there is any way the US can avoid a recession because we believe it’s already here.

We have no doubt the US is in the early stages of what is likely to be a deep recession. The duration of the recession is largely in the hands of officials. Even though another stimulus package is likely, officials have shut down the economy.

Despite consensus views which place a best-case scenario for a Coronavirus vaccine at 12 to 18 months, we believe there is a good chance that a vaccine ready for distribution before the end of 2020 and/or one or more effective treatments to be released. The timing and extent by which these events occur will largely determine whether or not we face another leg down in the global recession due to vulnerabilities in the financial system...