A series of individual reviews for each active MRP theme, specifically addressing the effects of COVID-19 on each of MRP’s current and recently suspended themes, as well as the broader macroeconomic outlook.
The Global COVID-19 pandemic continues. Back in March, amid the most devastating days of this ongoing crisis, MRP noted that the viral outbreak was certianly the most dramatic black swan event since 9/11. However, we also made sure to let our clients know that we were sticking to our guns and re-iterating almost all of our active themes.
As we look back on that call four months later, we can say that measured course of action was the correct response to a panicked decline of equity and commodity prices that eventually swung the S&P 500 into a short-lived bear market.
Efforts to contain it have had devastating effects on economic activity, but massive fiscal and monetary stimulation to fight the economic consequences of the coronavirus pandemic have lifted many equity share prices to all time highs. At this point, there are many green shoots indicating sharp rebounds in a number of sectors. MRP has anticipated this for some time, predicting an eventual V-shaped recovery for the broader economy back in May, a position that just 10% of investors were on board with at the time, according to a survey by Bank of America Merrill Lynch.
Still, the road to a full rebound remains a long one and investors will have to digest plenty of bad news about the spring plunge which continues to surface.
This week’s first read on Q2 US GDP growth, for instance, showed an unprecedented plunge of 32.9% on an annualized basis – by far, the largest ever. Unsurprisingly, personal consumption led the drop, subtracting 25% from the Q2 total as lockdowns and widespread unemployment crippled discretionary spending among the lion’s share of American shoppers. Though a downturn of this magnitude was expected, it has certainly injected a bit of volatility into equity markets.
On the bright side, however, this “belly of the beast” period must also be looked at as a potential inflection point.
Though some things may never truly return to “normal”, MRP has always looked ahead to light at the end of the tunnel. Our focus remains fixed on how the upending of the old order will create discotinuities across markets and shape the future of investing, as well as what comes after the COVID era.
Amidst the many cross currents, an update on MRP’s current list of themes is in order…