Henry James International Management March 2020 Market Commentary

There is only one story in town: COVID-19. While these are unprecedented and extremely worrying times from a range of perspectives, including public health, health infrastructure, medical/pharmaceutical supplies, mass unemployment, economic contraction and falling equities prices and bond yields, we are optimistic that light is becoming visible at the end of this harrowing tunnel.

While it is obvious that global markets have been oppressed by this deadly pandemic, the forces that are affecting their movements are a bit of a mixed bag. On one end we have raging fear, Western nations charging towards what may be approaching the first wave of their COVID-19 infection’s apex, as well as the reality and implications of having been in social isolation for the past month and the likelihood of it persisting for a while longer. On the other end, we see improved and more stable market liquidity, global governmental stimulus packages along with evidence that South East Asia is approaching a place from which it may be able to resume some semblance of normality (economic and otherwise).

Despite COVID-19 having caused an alarming number of deaths in Southern Europe (Italy and Spain) as well as carving out a path of destruction throughout the rest of Europe, America and elsewhere, we are feeling more optimistic in the short term. Firstly, it appears that social distancing is beginning to bear fruit in Southern Europe, where infection numbers and deaths are decreasing for the first time in a matter of weeks (of course, decreasing does not mean infection and death figures are still are not really high). Moreover, on April 5, 2020 New York Governor Andrew Cuomo revealed that in the previous 24 hours new hospitalizations had fallen by 50%. Despite Cuomo wisely cautioning against wishful thinking that this evidence suggests that the crisis is beginning to plateau in New York State, as good news is in short supply these days, we will take it with open arms.

The fuel for our optimism is driven by the dramatic increase in COVID-19 testing after a disastrous start by the United States government. According to US government officials, labs are processing almost 100,000 tests daily and that over 1.4 million test have so far been administered. Abbott Labs delivered more good news as its new quick test could be used very soon to clear first responders, medical personnel and other key workers.

South East Asia is apparently about to get back to work – perhaps not as one envisaged ‘work’ pre-COVID-19 but ‘work’ nonetheless – as China, Japan and South Korea have begun ramping up manufacturing. A stunning example of this – which would have been unthinkable a matter of weeks ago – is Japanese automaker Honda Motor Co. along with rival Nissan Motor Co. both resuming partial production in Wuhan, the city in which the pandemic first began.

Looking to the future we have a positive outlook for the following sectors: pharmaceuticals that provide services to fight COVID-19 along with the revolutionary technology that will help fight cancer and other diseases; communication services including streaming, telephone, video games, video conferencing and more; and companies that provide the technology for logistics and cloud data storage. In terms of retailers, CVS and Walgreens appear to have a place in the future recovery and government expenditures will help major industrial companies stay afloat. Lastly, the low cost of energy, which many will view as a drawback, will help to power a global recovery when the time is right.


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