Opening Up Judiciously | Seeking Alpha

The decline in growth of coronavirus cases and deaths in many parts of the U.S and countries overseas warrant the slow opening from the current lockdown, but it must be done judiciously maintaining degrees of social distancing, masks and lots of handwashing as any acceleration in cases would be devastating both economically and psychologically. After all, we still do not have a therapeutic, antivirals, and sufficient testing including antibody tests. There is little to no chance to return to normalcy until we have all been vaccinated and we are at least a year away from that. So, I ask, what feels safe right now to you in terms of loosening protocols?

While the U.S monetary bodies and all other countries continue to increase funding by trillions to keep individuals and companies afloat until we can reopen, none of this stimulates real demand. The global economy, outside of China, will remain in a free-fall and won’t bottom out until we begin to reopen. We get it but it must be done carefully to avoid backsliding as that would be devastating. We really need to weigh economic and its personal devastation versus health.

We need to remain focused on making it to the other side but also thinking about the long-term consequences of what governments and monetary bodies have done both fiscally and monetarily to get us there. What we are doing to stay afloat is unsustainable and there will be payback on the other side!

The latest coronavirus stats as of Friday were indeed encouraging. The number of coronavirus cases worldwide rose 25,894 to 12,748,938 while deaths increased 1,234 to 192,153. Cases in the U.S increased only 267 to 881,709 while deaths rose by only 7 to 50,243! Cases appear to have crested but you need to delve further and look by country, region, state and locality when considering opening. Our healthcare workers have done a yeoman’s job learning to treat patients of the virus and we fortunately now have the capacity to handle the virus when and if we have mild outbreaks in the fall.

The narrative has now moved to where to open, state by state and city by city, following Federal government guidelines from Phase 1 through Phase 3. The administration must require states and cities to adhere to the guidelines as risks to the nation of flair-ups are huge. We would like to see mandatory use of face masks and some of degree social distancing until there is enough testing and a therapeutic on the market at a minimum.

What will the other side look like?

We will continue to be in this uncomfortable transition phase until we are all vaccinated which probably won’t happen until 2022. Will you go out to a restaurant, movie, social/sports/entertainment event, fly on an airplane, stay at a hotel, and go shopping in the mall? On the other hand, if there is a degree of social distancing and use of masks, you may be willing to do some of those things: maybe work outside, go to an office or factory, a single standing store, doctors, and classes. Online services: internet/smart devices for social media, business, education, shopping, etc., will remain the big winner until 2022, after which, increased use of the web will be embedded in the fabric of America and the world.

Investing for the other side

Global economic growth, excluding China, will not bottom out until we begin opening loosening restrictions country by country, region by region, and state by state. We still are forecasting an elongated U as the process will be long as consumers/businesses remain cautious taking mini steps until more confidence is built; a therapeutic is found; testing including antibody tests are widespread, and number incremental cases/deaths remain on a downtrend. The panacea will come when we are all vaccinated permitting a return to a more normal environment.

The financial markets are being supported by the huge amount of liquidity being created by fiscal and monetary stimulus around the world. Investors are being forced out on the risk curve even though it is not seen really in equity capital flows yet. Investors continue to pile into cash and bond funds holding back on equity investments. Active managers will finally have their day as passive managers invest in index funds comprised of the losers in this environment.

We remain focused on the beneficiaries of the new normal where more time is spent at home using the internet and smart devices for social media, business, education, healthcare, and services, which heretofore, where carried on outside of the home. Fortunately, all these companies have great managements, sensational short/long term business strategies and the financial resources to execute their plans while still being able to increase dividends and stock buybacks.

The winners include: semis that support data centers, the cloud, smart devices, 5G, gaming and diversified technology companies. We expect Phase 4 of government support to include monies to expand wireless throughout the country and funds to buy smart devices for those who cannot afford them.

In addition, we have broadened our portfolios to include some financially strong companies that will benefit from opening America, albeit slowly. We remain focused on management, business strategies and financial strength. We would avoid companies that accepted government money. Clearly, they have problems.

We do not own bonds, the dollar, industrial commodities including oil, non-residential real estate, and financials including private equity funds.

Remember to review all the facts; pause, reflect, and consider mindset shifts; turn off your cable news; do independent research listening to the earnings calls and… Invest Accordingly!

P.S. Our weekly investment webinar will be held on Monday, April 27th at 8:30 am EST.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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