Henry James International Management April Market Commentary

Last month we stated that – despite the catastrophic way in which the COVID-19 pandemic has threated and affected life and caused the global economy come to a veritable halt – we believed a sliver of light was becoming faintly visible at the end of the tunnel. While the situation in which Earth’s inhabitants find themselves remains absolutely dire and no less serious today than it was a month ago, we feel that our prediction has largely come true, albeit with a caveat: though the light is visible it remains distant and faint. The month of April displayed evidence of “green shoots” as most major indices posted positive returns. Indeed, the broad based MSCI EAFE index returned 6.29% after posting negative returns in each of the preceding 3 months.

From the perspective offered from our isolated home desks, we are expecting very weak economic activity for the second quarter with all major countries having economic contraction and increased un-employment for 2020’s second quarter. Indeed, the economic plunge in this quarter will likely set records, the likes of which we haven’t seen since the Great Depression. And yet, there is hope. Provided that COVID-19 does not see a pernicious second wave, we expect an economic rebound in the 3rd and 4th quarters and continuing into 2021. With massive stimulus progams in place globally, alongside historically low interest rates – not to mention the price of energy and fuel being at all time lows, which essentially offers the positive impact of a global “tax cut” – there are good reasons to be optimistic for the second half of 2020.

While we seem very far away from life as we knew it, social distancing has worked and is working. Throughout the world the hallowed ‘flattening of the COVID-19 curve’ has been realized: in Asia, Europe and now in the United States. Consequently countries like Belgium, Germany, Italy and Portugal have started the slow reboot of the European Union through the opening of some retail businesses and slightly relaxed rules about leaving one’s home. Schools have even re-opened in Germany (with strict sanitation and social distancing protocols, of course). While it cannot be denied that there are fears of a second wave brewing in Germany and beyond due to the relaxing of social distancing measures, the world seems to be inching in the right direction.

As social distancing is relaxed and people are successfully able to get back to work, the economic vacuum caused by COVID-19 will abate. We believe there will be a resurgence of consumer demand pushing factories to ramp up production in order to restock depleted inventories as social distancing restrictions are lifted. Consumer demand is increasing in the developed markets and we believe that businesses will accelerate efforts to re-open as soon as possible given that their very existence depends on it.

In the United States COVID-19 testing is ramping up across the entire country. Here in New York City one is able to get tested for $50 at an Urgent Care Center; of course, while this sum of money may be ‘chicken feed’ to some, to others it will be prohibitive, which presents a range of problematic health and social issues. Nonetheless, we are optimistic that the increased testing, along with contact tracing will stop the growth of large infection clusters.

We expect that Asia and the Pacific Rim countries will lead the way in economic growth in the second and third quarters and that their markets and global investors may mutually benefit from one another. Despite fears of a brewing second wave in China, Japan and South Korea, we are hopeful that their manufacturing will continue to ramp up through the next few months. In early May South Korean Prime Minister Chung Sye-kyun announced that his government would allow business activity to resume in a phased fashion and that gatherings and events could take place provided they follow strict disinfection and social distancing guidelines. This will include schools, parks, museums and even the re-start of the Korean professional baseball league (unfortunately in front of empty stands).

Looking to the future, we have a positive outlook for the following sectors: companies that are able to offer consumers and corporations the ability to sell, package and deliver internationally; the pharmaceutical sector and its companies who not only provide services to fight COVID-19 but also those who fight cancer and a full range of diseases; communication services including streaming, telephone, video games and video conferencing; and technology companies that provide the backbone of communications services including cloud data storage.

In our view, the light at the end of the tunnel is visible, and its vibrancy and radiance will only increase as we continue to turn the tide in terms of our global health battle with COVID-19. We believe markets will begin to recover and there are several economic sectors poised to make solid gains as the recovery from the pandemic continues.


This material is prepared by Henry James International Management and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are obtained from proprietary and nonproprietary sources believed by Henry James International Management, to be reliable, are not necessarily comprehensive and are not guaranteed as to accuracy. No warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions is accepted by Henry James International Management, its officers, employees or agents. This material is based on information as of the specified date and may be stale thereafter. We have no obligation to tell you when information herein may change. Reliance upon information in this material is at the sole discretion of the reader. Certain information contained herein may constitute forward-looking statements. Estimates of future performance are based on assumptions that may not be realized.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Any indices chosen by Henry James International Management to measure performance are representative of broad asset classes. Henry James International Management retains the right to change representative indices at any time.

Henry James International Management and its representatives do not provide legal or tax advice. Each client should always consult his/her personal tax and/or legal advisor for information concerning his/her individual situation.