The necessary shutdowns to combat COVID-19 sent the economy rapidly into recession. Yet after the initial shock, the stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. market has proved remarkably resilient. What’s behind this disconnect and how does it affect investment decisions going forward? Chief Investment Officer Jim Lowell broke it down in our recent quarterly webinar*—Take Your Pick: Recession or Recovery?
Please enjoy the excerpt below and click here for the full webinar replay to hear more.
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Jim Lowell: We may be in a serious recession. We know that the Federal Reserve and Fed equivalents around the globe are clearly riding to the economy’s rescue with not just dramatic stimulus measures in terms of past precedent, but also that the rapidity with which they are riding to the rescue of the economy is unprecedented.
That said, they’re doing both of those things for a reason. And some of the points that [Chairman] Dan Wiener and [Director of Research] Jeff DeMaso raised about the fragility of recovery, especially based on the likelihood of having to re-shut down places that have reopened (and of course, we’re wending our way toward another flu season) are going to cast a pall over our ability to feel confident about defending the current recession. But all of that said, it never is far from our mind in terms of thinking about whether or not we’re inclined more or less toward a recessionary event.
We’re risk-aware managers. We are always focused on the managers we invest in right alongside of you in terms of their risk-adjusted performance, not just their absolute return. And our asset allocation is specifically designed to be able to address whether we think we are heading into, in, climbing out of or safely beyond a recession.
So I would say that one of the things that we have done over the last 20-plus years is not necessarily anticipate a recession and make investment moves based on that anticipation, but to never ever put our feet up on the desk and assume that a recession isn’t around any economy’s corner.
*Webinar recorded after the market closed on Wednesday, July 22, 2020.
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