Crisis and Opportunity
The past several weeks in the United States have been akin to a war effort. Millions of Americans have come together–by staying apart–to address the national health emergency and to fight the spread of an invisible enemy, the coronavirus.
The health scare joins a long list of crises that America has endured–a Civil War, two World Wars, a Great Depression, and countless outbreaks of disease. In every case, America rose to the challenge–and will do so again. As the most advanced economy in the world, with the strongest, most resilient private sector, and unmatched scientific talent, America will adapt and overcome the difficulties we face in the coming months.
Even so, whether the present crisis is merely a temporary disruption to American life or proves to be a generation-driving event that fundamentally changes the country remains to be seen.
To say that financial markets suffered a disruption is an understatement. Markets experienced historic losses in the first quarter, with the Dow Jones Industrial Average falling more than 30% from peak to trough–or more than 10,000 points–in a matter of weeks. It was the fastest decline in history, even quicker than the historic declines of 1929 and 1987. Nearly every corner of the markets suffered losses, including some areas that have traditionally acted as safe havens.
Given that China is the first country to gain control over the virus and now has begun to restart its economy (bottom right chart – click on image to enlarge), it is fitting to remember that the Chinese words for “crisis” and “opportunity” are the same. Indeed, that is the theme of this quarter’s report: to shed light on the present crisis, discern the path forward, and identify opportunities that emerged in the midst of a chaotic period for investors.