2020 Q1

In these difficult times it is easy to think we are alone. Especially when our support systems are far away or have been reduced to virtual connections. I have been encouraging my family to be thankful for what they have around them as we face this current set of circumstances. I would like to share with you that I am thankful for my faith. I am thankful for my wife Ruth. I am grateful for my daughters (5 of them if you didn’t know). I am grateful for our work that allows us to help people get through times like these. We are grateful for you and thank you for the trust you place in us.

I am optimistic about our country’s ability to weather a crisis like this and use it to grow. My sense is we are living through days that will define future generations and challenge current societal and business paradigms. For example, focusing on business patterns, we believe the prospects for increasing nationalism in the aftermath of COVID-19 will be tangible. We even expect that our economy will benefit from businesses’ reducing supply risk by onshoring some of their processes.

I heard the CEO of JP Morgan, Jamie Dimon, remark the other day that this will be the first planned recession we have ever faced. It does strike me that the economic numbers prior to the coronavirus were not taking us into a recession, as discussed in past communication, but that government action now, including stay-at-home orders, will ultimately lead to a certain recession. I am not saying it is not warranted, only that by planning our way into one, we now get to plan our way out of one, and there has been no shortage of firepower being utilized. The magnitude of the fiscal stimulus package passed by Congress is remarkable. Our experience in 2009 shows that this should make a difference. In addition to the fiscal stimulus, we wondered if the Federal Reserve had any more arrows in its quiver. It actually invented some new arrows this time around and jumped in front of the economic engine to assist the economy much more quickly than in 2008-2009 – and the assistance is bigger as well.

While monetary and fiscal stimulus is beginning to flow, with the need for more possible, the markets and the economy will also require stabilization in the energy sector. This starts with agreements between Russia and Saudi Arabia (and potentially even a reduction in U.S. oil production). Ultimately though, this period we find ourselves in started as a biological issue and continues to be one. This means it is still difficult, and too early, to quantify the full risk and potential length of the economic disruption. We need the benefit of time to be able to more solidly know how and when the economy will emerge.

Through this period, we raised some cash while simultaneously taking advantage of pricing to adjust the portfolios for a longterm benefit. We are modeling projections for various recovery scenarios and are comfortable holding more cash than usual until we have more information. We anticipate GDP growth returning in the third quarter with industrial production beginning to show improvement toward the end of the year. An “all out” recovery is probable for 2021 depending on the decline of the coronavirus, a recovery in the oil markets, and accomplishment of a healthy presidential election. We also expect that the stimulus packages passed in 2020 will provide a tailwind in 2021.

While not set in stone, I wanted to give you an idea of what we expect both this year and next. I imagine these forecasts will be revised as new information comes out and is integrated into the projections. However, as a nation we will persevere and through these trials and tribulations come out stronger. As always, if you have any questions or would like to discuss anything in more detail please let me know. Thank you.  

Marc Henn, CFP®
President