What could go right | Orion
The article emphasizes that while hope alone is not a viable investment strategy, during the unprecedented COVID-19 pandemic it is necessary to cautiously hope for positive developments—such as a rebound in oil prices, which have plummeted due to decreased demand and geopolitical conflicts—to help mitigate the severe healthcare and economic crises, all while underscoring the importance of thoughtful, risk-adjusted portfolio planning to meet long-term financial goals.
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What could go right
Wealth Management
April 6, 2020
April 6, 2020 09:02 AM
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Someone somewhere was the first to say, “Hope is not a strategy.” Now, that is true in all walks of life, but especially in investing. You can’t hope the market will go up. You can’t hope your portfolio will provide an adequate rate of return. You can’t hope you will have enough to retire on. You, me, all of us, need to plan appropriately when it comes to investing, to invest what we need to meet our long-term objectives and invest that capital in a thoughtfully constructed portfolio that should deliver the maximum rate of return for the level of risk we are comfortable taking. With that said, we are living through an unusually scary period as the COVID-19 pandemic impacts our people and our economy in an unparalleled manner. As such, we think a bit of hope is not only appropriate but necessary. Below are four things we hope will come to pass that could meaningfully mitigate the impact of the ongoing healthcare and economic crises:
- The price of oil bounces – the price of oil collapsed due to a COVID-19 driven drop in demand and a production war between Russia and OPEC. While lower oil, and gasoline, prices are a tailwind for the US consumer, the drop in price is hurting the very significant US oil and gas industry. A bounce in price would help the US oil patch and push up inflation, which would also be welcome. A hoped-for Saudi/Russia agreement on a cut in production pushed the price of oil up a record 24% on April 2, 2020.
- Companies step up – US companies are in fantastic financial shape, with many in a position to prevent some of the financial pain American workers would be expected to experience during the coming economic slowdown. To that point, Comcast set aside $500 million to pay the salaries and benefits of workers impacted by COVID-19, as opposed to laying off those workers.
- Expedited government relief – the Federal Government is trying to push out $2.1 trillion in economic aid to states, businesses, and workers - an unprecedented amount and administrative undertaking. The quicker that aid reaches those in need, the less meaningful and less severe the impact of the COVID-19 driven slowdown.
- COVID-19 testing and treatment – it is worth remembering that a significant amount of capital – intellectual and financial – is being directed at containing, treating, and curing COVID-19. We know the news will get worse before it gets better, but it will get better. Last week, Johnson & Johnson announced a vaccine candidate it hopes will be available by early next year, and Abbott Laboratories launched a rapid test kit. After a slow start, the US is conducting 100,000 COVID-19 tests daily.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only.
Tagged: market perspectives, weekly wire, Tim Holland, COVID-19, oil pricing
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