Millions of people remain unemployed. In some countries, new COVID-19 cases continue to rise at alarming rates. Some jurisdictions appear to have been too hasty with their re-openings and may need to reverse course by closing segments of their economies again. Most sources agree that it is highly unlikely that a vaccine will be available before next year.

When the outlook for the economy is so uncertain, why have markets been so strong?

Below is a link to an excellent article by Bill Miller, who is widely regarded as one of the most successful portfolio managers over the last 30 years. He is best known for the rare feat of beating the S&P 500 index for 15 consecutive years (1991-2005).

Click here to read the article

Key points that resonated with us include:

• Corrections can, and will, happen but: “… stocks go up most of the time because the economy grows most of the time”
• “The market’s behavior since the March 23^rd bottom … has confounded most observers, from novice investors to the most experienced and savvy investors”
• “Don’t fight the Fed (the US central bank, The Federal Reserve) … It took a while for the Fed to marshal enough firepower to end the financial crisis of 2008/09 but end it, it did. This time their response was immediate and overwhelming and stocks have responded accordingly”
• “This is similar, in my opinion, to what happened around the bottom in 2009: People became risk and volatility phobic and most missed the great 10-year bull market”
• “Stock prices typically lead the economy by 4 to 6 months so it is, or ought to be, no surprise they have been headed higher”

We worked diligently to have a process in place that allowed us to dodge the worst of this spring’s correction and enabled us to re-establish our positions for much of the rally that followed. It has been a challenging time, but we are quite happy with our current portfolio positions, both for today and for the coming months.

Please contact us if you have any questions.

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