by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
March 19, 2020
WE’RE HARDLY NAIVE: The coronavirus will claim thousands more victims, and the U.S. economy will contract for several months. That’s not news. What is news is the emergence of several encouraging signs; here are five:
1. China reported no new local cases yesterday; life is returning to normal there.
2. Worries over liquidity have prompted even more dramatic action from the Federal
Reserve, which announced just before midnight last night that it will resurrect a major
tool from 2008, the Money Market Mutual Fund Liquidity Facility. We reiterate: the Fed will do whatever it takes to prevent a liquidity crisis; the banks are very well-capitalized.
3. The Senate passed, and President Trump signed, a $100 billion package of aid to
victims of the virus — steps such as paying for sick leave, boosting unemployment
benefits, increasing food stamp payments, funding free virus testing, etc.
4. Now the heavy lifting begins on a massive bill that will cost a minimum of $1
trillion — probably more — that will send checks to virtually all Americans in
early April and again in mid-May, bail out businesses and allocate more funds for health care. This may take a week or two, but money is no object.
5. A sense of national mobilization has taken hold in Washington and throughout the country. Aside from some clueless idiot kids at Florida beaches, there’s a growing sense of purpose, that we’ll get through this. We’ll look after family and neighbors.
OUR INDUSTRY IS FAMOUS for anticipating what will happen six months down the road, and what we clearly detected yesterday when talking with investors is that a market bottom is within reach — and everyone has a wish list of cheap stocks to buy when the bargain hunting begins.
TO REITERATE, WE’RE HARDLY NAIVE: Outside of Asia, the virus will get worse before it gets better, and people who live check-to-check are scared. But monetary and fiscal policy definitely will “go big” as the government mobilizes with a massive response, unlike anything since the 1930s.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.
This post was first published at the AGF Perspectives Blog.