In our view, the markets feel much healthier at the end of April than a month ago, but underappreciated in the improved sentiment is not only the scale of March policy action, but its continuation into April. Actions announced in April would ordinarily have remained in headlines and discussion for weeks, but the nearly half trillion dollar U.S. fiscal stimulus package has been treated almost as a footnote to its much larger cousin in March. Similarly, Fed and other central banks not only continued to implement the massive programs initiated last month, but significantly expanded on them. For example, the decision to purchase high yield ETFs and increase corporate debt purchases are meaningful expansions of market support. These functioned to not only keep newly reopened markets going, but to encourage additional capital markets activity. The hope is by keeping access for companies to capital markets, they will be able to survive and keep people employed. However, the most visible result so far is that markets continue to heal with one of the stronger performance months for risk assets in recent memory, while approximately 30 million people have lost their jobs. This highlights the growing disconnect between Wall St. and Main St. As we observed last month, Wall St. is largely looking past the current stress, while Main St. is living it. Fed actions have supported the market recovery and their unsurprising statements that they do not intend to withdraw support too early lend further hope to market stabilization. Markets have healed significantly, but continue to present opportunities. Initially, the dislocation was so severe that broad exposure was compelling. We continue to find broad market spreads attractive, but having seen weaker issuers mixing in with stronger, we view a robust opportunity set, but one requiring a discerning eye to capture. While monetary and fiscal policies have been tremendous supports, there is still significant uncertainty as to when the economy will re-open and what that will look like for the individuals and businesses impacted. As such, we would advise against being lulled by the recent recovery to believe volatility has abated. We hope the worst has passed, but are being cognizant that much is still unknown.
This is not intended to serve as a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. Information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. This publication is prepared for general information only. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investment involves risk. Market conditions and trends will fluctuate. The value of an investment as well as income associated with investments may rise or fall. Accordingly, investors may receive back less than originally invested. Investments cannot be made in an index. Past performance is not necessarily a guide to future performance.
Taplin, Canida & Habacht, LLC is a registered investment adviser and a wholly owned subsidiary of BMO Asset Management Corp., which is a subsidiary of BMO Financial Corp.
