Tim Hoyle, CFA, Co-Chief Investment Officer
We are facing a recession like no other. Never before have government officials mandated we stay at home and avoid economic activity. The synchronized slowdown in global economies has led economists to draw parallels to the great depression, yet not forecast another one. There is good reason to believe the economy can and will bounce back once this crisis has passed. The scale and speed to changes in monetary, fiscal, and regulatory policy stands in stark contrast to both the Great Depression, which started in 1929 and lasted for almost 10 years, and the Great Recession of 2008, which lasted less than two years.
To a great extent, the swift policy reaction we are seeing from our government agencies matches the swiftness with which our world has changed during these past few weeks. We have experienced the quickest economic slowdown ever, accompanied by the swiftest ever reversal of stock market fortunes. We will address these issues on our client call, scheduled for Monday 23rd at 11 AM.
On the call we will review the humbling nature of investing. Equities have and, we believe, will continue to generate great wealth for investors. However, the cost of investing in stocks is the emotional toll that times like this extract. There have been 19 significant market declines since 1945; twelve have been associated with recessions, while seven have been associated with events like the recent trade war. Each bear market is unique, but most also share a similarity: an existential crisis to which there is no apparent solution.
We anticipate there will be a conclusion to this crisis, a solution found in human ingenuity and compassion, aided by bipartisan support from elected officials. As of Sunday night, the aid package being contemplated by Congress is approaching $2 trillion – close to 10% of our nation’s GDP. This unprecedented figure is warranted. It will certainly add to the nation’s debt burden, but there is no better option.
We look forward to discussing these topics and more as well addressing many client questions on the call. This is the most quickly evolving market environment of our lifetime and you can expect your team at Haverford to continue to communicate with you in various forms during the weeks ahead. Our thoughts go out to anyone impacted directly or indirectly by this virus.