Investing In Our Coronavirus World

Investing In Our Corona Virus World.

By: Robert Schneeweis, Chief Executive Officer

To Our Clients: 

First of all, we hope you and your family are healthy. Here in Minnesota, our state has a “Shelter in Place” order for the next two weeks – and our public elementary and high schools for the most part have gone to “on-line” education until May 4th. I think this is a fairly common look across the rest of our country, so we’re in it with you. These realities point to the many adjustments in our social and economic life that containing the Coronavirus pandemic is requiring. Obviously, the questions we get most consistently these days are:

“Should we be buying the dip?”
“Should we be more in cash?”
“What should we do now?”

So, let’s be clear: we are living in a time dictated by a global health issue. “We all think of a recession as having an economic underpinning, but this has nothing to do with economics. This is literally about trying to stay away from people,” said Aparna Mathur, a scholar at the American Enterprise Institute. This “pandemic” has in its wake, however, also created a world-wide “economic slowdown” that is affecting our lives and our investments. Of course, it is the health issue that needs to be resolved first. In his initial appearance on morning television Thursday, Federal Reserve Board Chair Jerome H. Powell told NBC’s “Today” show that the nation “may well be in a recession” already, but making the country safe has to be the top concern. “The first order of business is to get the virus under control, and then resume economic activity,” he said. The Federal Reserve, and now Congress, have recently made significant moves to help stabilize our economy until social conditions themselves stabilize. What the recovery will look like depends greatly on how soon that starts. The good news here is that it appears our government will not be shy about further stimulus, if needed by our economy.

What sets this downturn apart is how rapidly the virus — and the economic pain — have spread. The question remains whether this will become a long-lasting slump or a short-lived flash recession. Markets try to estimate the future for businesses. Despite current opinions from media pundits, the future essentially relies on how long the US and the global economies will remain hampered by closures and restrictions of various business activities. Unfortunately, the question of when the virus comes under control remains unknown. And money and rhetoric only go so far. All this makes for an incredibly complicated situation for investors who are deciding whether to buy, sell or just sit tight. Two well-known investors (Leon Cooperman and Mohamed El-Arian) state that until the end of April, any statement is one of hope rather than knowledge.

As a result, despite the losses in stocks and bonds that have already taken place this year, our discussions with you will recommend continued caution. Market volatility won’t settle until we reach some sort of inflection point in the coronavirus crisis. It would be at this point that economists would be able to begin modeling the outlook for the economy with any degree of certainty. We then believe that investing in areas the government has decided to support, and companies with strong cash positions, will be attractive options.

Know that we are here for you in both good times and difficult times, to give you our perspective, to discuss your options, or simply to talk things through.

Why Yes Wealth?

Why Yes Wealth:  An Intelligent Path Through a Forest of Often Confusing Investment Choices.

By: Tom Schneeweis, Chief Investment Officer

Many of us are on a constant search for answers to basic questions of how to achieve individual and professional success (whatever that is defined to be). The importance of determining one’s goals or life targets is illustrated in the classic “Alice in Wonderland” where it is pointed out to Alice that; “If you don’t know where you are going it does not matter what path you take”.   This is especially true if one is considering one’s investment path or future financial goals. Moreover, if one is not personally familiar with the investment settings, it may make sense to have someone help to determine what path to take, to make sure you remain on your current path or if necessary to move one away from one’s current path.

Why YES Wealth Management? We do not have the time in this short blog to detail all the reasons why YES Wealth Management may be your best companion, but if you wish to consider YES Wealth as your guide, please visit us at www.yeswealth.com.  We believe that we could have even helped Alice, as we helped many others over the past thirty years, to get through today’s financial forest. Simply put, we are familiar with the new investment landscape and the path you may wish to take or may have to take to get through it.

Fortunately, YES Wealth Management offers a unique set of skills to help you in your quest:

– Over Thirty Years of Investment Experience over a wide range of traditional and alternative investments – Offers Truly Independent Direction (Free from Large RIA Firms’ Pre-packaged Products or Advice)

 – Globally Known for Expertise in Investment Risk Management

 – Provider of Range of Modern Wealth Management Services

Contact us today to start your wealth management journey with a free consultation from one of our friendly and knowledgeable financial advisors.

There’s Reason for Optimism (But Are Stock and Bond Prices Already Showing It?)

Reasons For Optimism
By: Robert Schneeweis, Chief Executive Officer

Many headlines today reflect data that show things are getting better.  Most important, of course, is the coronavirus.  Even with vaccine issues in Europe and a peak in India, the global trend is encouraging.  Good news indeed, but for investors we have to ask “Does this mean we will see a rise in the market or is much of the good news already in the prices of stocks and bonds?”

Certainly, some companies like airlines, hotels and resorts with the most to gain from economic reopening still look to have ground to make up from the virus-stalled economy.  Housing prices are up dramatically across the U.S.  From those perspectives, the market hasn’t come back too far.  Unemployment numbers appear to be getting better, short-term interest rates are low and government stimulus for infrastructure is likely and kids are back in school.  All reasons for optimism.

What can we expect then going forward?   Many Americans have cash to spend or invest as Congress has been so aggressive with fiscal stimulus.  Will this lead to rising stock prices or concerns over inflation and unpaid loans if they don’t continue these programs?  Investors should be aware that the stock market overall is incredibly expensive in historical terms, and prices are very dependent on the Federal Reserve continuing to support low bond yields.  One measure of long-term return vs risk is the “Cyclically Adjusted Price Earnings” (CAPE) ratio or “Shiller PE ratio”.  At the current number of 37 it is more expensive than at any time in 150 years other than late 1999 and early 2000 (the dot-com bubble) and long-term interest rates are at historically low levels.  The Federal Reserve is no doubt watching the prospects for employment, wages and prices, but they need investors to understand that it’s willing to rethink its monetary policy when the numbers demand.  At the moment, I’m not sure that message is getting through to investors.

As we look at the current pandemic, it’s interesting to see that 1920 had a number of similarities to 2021 – digging out from the Spanish Flu beginning in 1918 vs today’s Covid-19, the combustion engine of a century ago vs the incredible new computer technology of today.  So, will we have a booming stock market like the 1920’S?  One critical difference between the start of the 1920s and today is as 1920 came to a close, the U.S. stock market was the cheapest on record – before or since – and today’s market by contrast is one the most expensive.  The CAPE/Shiller ratio is not a signal about what will happen to stock prices in the near term or any specific path in the years ahead but it has been a good barometer of the return one may expect over the medium term.

Bottom line, the CAPE/Shiller ratio is not a holy grail of return forecasting, and factors other than “valuation” also impact future returns, such as GDP growth, investor sentiment (outlook for future investment returns), politics (stimulus and spending bills) and productivity gains.  Investors need to be aware though that US stock market returns may be lower the next 10 years than they have been the last 10.  Interest rates, while historically low now, won’t stay that way forever and existing bond holdings will suffer when rates do rise.  More growth potential may exist outside of the US.  But for now, the issue of the pandemic is getting better, kids are back in school and people are getting back to work, and for that we can all be thankful.