That’s a good question, so I would say the recovery, and when I describe the recovery I’m talking about the economic recovery, I think has really three phases to it. The first phase was of course an initial deep drop that we’ve already experienced and we’re already through and past. The second is kind of a steep but smaller bounce back, so in other words you get that pent-up demand in a coming off of trough-level data, a big increase in the data percentages as it looks like through the summer months as we reopen the economy. We think we’re in that phase right now. The problem is even though that’s a steep recovery, it’s still smaller than where it won’t bring us back to the levels we were in January and February. And then I think the most important point of the recovery is how long it takes to kind of reaccelerate growth again. Unfortunately, as you look out into late 2020 and into 2021 you kind of expect more of a flat but sustainable growth level. So it kind of tapers off or tiers off at a flat line level. It’s hard to look at it and say you’re going to get huge recovery in the near term. For example, bipartisan independent groups like the Congressional Budget Office, the CBO, just came out last week and said they don’t anticipate us getting back to the same economic recovery levels until second or third quarter of 2022, which is quite a long ways away. So I think we have to be prepared for the recovery to look good in the next couple months as we recover from those April or early May trough levels, but it’s going to take a while to really get the economy back humming and accelerating where it was pre-COVID levels.

Cash should be used as a tool. We’ve been recommending since this whole thing began that investors start to look for places in their portfolios that look a little bit riskier than they did in terms of return. And for those asset classes — and we’ve identified them: like international equities, U.S. small caps, those sectors like industrials and energy and materials — take some profits there, pull some money back. Those sectors have done really well lately, and international has had a nice little rebound, so has small cap. Now is the chance to take some profits, put that cash aside, but don’t sit on it like a shield or a defense mechanism. Instead, use it as a tool. What you want to do is look for opportunities to get back into the sectors that we like going forward. Those are the quality sectors we’ve mentioned, such as information technology, consumer discretionary, and communication services. Look to put that money back to work. Do it incrementally. No reason to put all the chips back to work all at once, but this is a good plan, we think, for investors going forward. Use cash as a tool, not as a shield.

It depends a little bit, I guess I would say overall you should always stick to your plan, you know, and make sure that your allocations are tight to where those long-term plans are going to be. You may still actually, notwithstanding a 37% recovery from the trough, you may still be underweight your strategic allocations for equities because the market is still down about 6%, 7% year-to-date so far. So if that’s the case it’s not a bad time to basically dollar-cost-average and rebalance the portfolio back into some of those sectors. We still think there’s opportunity in some of the places we like. So for example, financials just this week finally started to catch a bid. That’s been one of the worst performing sectors. It’s a sector we like on valuation and opportunity, so there’s cheap prices there. Health care and technology we think are long term secular plays, so those will continue to offer opportunity over the coming weeks and months. The one thing I would note for those who are maybe looking at a more short timeframe, I was just looking this morning, so we now have 99% of companies in the S&P 500 trading above their 50-day moving average. So what does that mean? That just means prices have come up really fast and a really long ways in a short duration of time. Generally, when that happens, markets are a little bit overdue for kind of a pause, a slowdown, maybe even a little bit of a retracement or correction. So if your timeframe that you’re looking at is really short, then I think there’s some time here for you to look at a little bit better entry levels than perhaps we’re seeing today as the Dow’s up almost 4% in the past two trading days.

It does. I think you’d be remiss to not think that it does. Just this past week there’s been a lot of estimates out by various groups, governmental groups, that are now estimating that the U.S. budget deficit for calendar year 2020 is going to balloon to somewhere between $3.5-4 trillion. So not more than several months ago there was a lot of hand-wringing and concern about trillion dollar budget deficits. Now we’re talking about a number and in fact we were almost at $1 trillion for 2019. I think we finished at $984 billion on the budget deficit for calendar year 19. So we’re talking about a number that’s 3.5 to 4 times that. That would be the largest U.S. budget deficit that the economy, the country has faced since World War II. It’s not completely unprecedented. We’ve had this kind of budget deficit during war time as a percentage of GDP, but it is certainly to the good question not something that we should endeavor to sustain or frankly could sustain over time. So the real key is, I think everybody agrees, that this spending is needed to help the economy hopefully get from point A to B through this recession and not create an economic depression, but when the economy reopens that budget deficit does need to decline significantly. If it doesn’t, there are certainly long-term effects. Those long-term effects include higher taxes, probably for the public or consumers and companies. It includes a reduction in government services over time if you maintain high budget deficits. In the intermediate to long-term, it would have some inflationary pressures. In the near-term, we think there are deflationary pressures that are most concerning and evident, but intermediate long-term, it could put an upward pressure on inflation. And also high budget deficits and high levels of debt really lean against economic growth, so it creates kind of economic stagnation. So, we know that through even before this recession much of this past cycle we’ve struggled with low levels of growth. So we do need to pare down budget deficits and ultimately, hopefully the debt, otherwise that has some longer-term impacts for the U.S. economy.

Yeah, that’s an interesting question. The coronavirus has not hit the country evenly. As many people know, the eastern seaboard from about Washington up through Boston is under a very strenuous lockdown, and the infection rates, and unfortunately the mortality rates there, have been rather high. That’s also been the case in Southern California and in Southern Florida, more recently in Detroit, and around New Orleans and Chicago. So there have been some spots and pockets, Denver, too. There have been some pockets that have had some larger infection rates, but much of the country is not in that position. What we think is going to happen from here, a couple of things, it depends on a couple of factors. One is what part of the country are you living in? Are you living in a part of the country that is exposed to a lot of foreign travel, people coming in from other countries, where the infection might have had a better chance to gain a foothold in the weeks of February and into early March? Those areas might take a little bit longer to recover. Another important feature will be, how soon, how quickly did the various governors of the different states start their lockdowns, and how well do the people in those states observe and obey the new protocols, including that of keeping the social distancing in place, wearing masks, allowing one’s temperature to be taken. These are the sorts of things that we should expect in the coming months as we begin to sort out who’s going to be well and who’s not going to be well. Who’s got the infection? Who’s got the virus and who doesn’t? Testing will also be important and the third factor. Which states will be able to ramp up their testing the fastest? Because information here is key. If one knows that one is tested and negative, then one has more confidence going out. If one is tested and one finds that one has the virus, then one stays in, and that prevents additional infection. So testing very important. Following the protocols, very important, and then of course, there’s just the unfortunate aspect that the coronavirus happened in February and March to gain a stronger foothold in other places. Those are the three factors, we think, that will determine the relative rates of recovery around the country.

What we saw this week is how oil bottoms are formed. Low price tends to cure low price. With these extremes we saw this week, the next step is oil producers in the world will stop producing. And that’s going to dry up supply. And if history is any guide, what we’ll find is, as we go on throughout the year, toward year end, demand will start pulling again on oil prices, but these low prices today wiped out a significant amount of supply. So, the balance will really start tipping to the favor of demand as we go into next year, which will bring prices higher. So, the quick answer is, we really did need to see low prices to cure low prices. I believe we are in this bottoming process, and we’re going to find ourselves by year end higher in price, maybe even as high as $40.

Well, it’s going to take much longer to thaw the economy than it did to freeze it, unfortunately. There’s a number of key points that I think are important here. Number one, even as we have 23 states as of today that are going to fully reopen or partially reopen, that accounts for about 35% of U.S. GDP, so we’re still not even at the 50% mark. A lot of those states are off of the coast, non-east, non-west coast, so they’re not quite as big and impactful, but they’ll be important to set the trend in how things go. The partial reopen is going to be hard for a number of reasons, not least of which, think about when people go back to work, they have to deal with child care, or daycare, or school systems that are not open and operating. One third of households in the United States have a child under the age of 14. So there’s a number of elements we’re going to have to solve for there. Number two, confidence is going to be crucial. We still are not fully there yet on testing and contact tracing. There will be social distancing rules in place that will be very important as we begin to open businesses and parts of the economy back up. And the third point I’d point to here, the government isn’t finished, as I said before. They’ve probably got another phase four package, they may have to extend unemployment benefits again, there’s more aid that needs to come to state and local governments both need to continue to fight this and stop gap measures to help along the way. So there’s a lot of things, as we think about how we’re going to reopen, that are going to take time, and it’s going to be a difficult process. But it’s an important process and one that we’re going to have to start working our way through slowly but surely.

Probably not on the market. You know, so there are some supply chain issues. I don’t think Americans are going to find themselves largely food short because of supply chain issues. There may be some very specific types of food that get impaired or have limitations, most prominently and what’s been discussed has been some potential air pockets in the supply chains for meat, so beef, poultry, chicken, those types of things. I would highlight a couple things here. One is the virus outbreak did impact a lot of those meat processing plants predominantly in the Midwest. Some of them are starting to reopen under executive orders, but it’s going to take time and even as we saw over the weekend a number of them remain closed, and a couple more in the Midwest even showed pretty sizable outbreaks. So that could create some near-term problems. It’s also important to watch, the agricultural industry relies on 250,000 guest workers a year. So as there’s limitations around immigration or people moving across borders into and out of the country, that has real world implications for supply chains and agriculture as well. And then also there is, unfortunately heading into this, there was a large amount of food insecurity within the country already. It was estimated 37 million Americans are food insecure, and unfortunately the coronavirus outbreak and the shutdown are only going to aggravate that and increase that over time, so it’s not just supply chains but it’s literally getting food to people through food banks that need it and everything else, which is hard when you watch these news stories about places where at the production level food is prevalent on the farm for example, but it can’t get through the supply chain ultimately into consumers’ hands or on a grocery store shelf, so there are some challenges there, but I think they’re real world challenges more so than Wall Street challenges at this point.

That’s a really good question. So I would say I tend to think the industries that shut down last as we got right to the border of when we began to shut down the economy may actually benefit from reopening first. So what would that look like? In places around the globe that have reopened manufacturing seems to have been able to reopen more successfully and faster than many of the service-based, so think restaurants or places where large groups of people need to gather in order for that to happen. So we expect manufacturing to probably be an early indicator. In fact we’re already seeing some of the auto makers discuss reopening time periods here in May. So we think manufacturing probably is one of those sectors. Construction will probably be another one, so you know as those projects just kind of came to a halt as construction workers were sent home, the fact that they can come back and in essence pick back up right where they left off probably allows them to restart fairly quickly assuming all the workers are able to return to work in good stead. And I would point to another one. I actually think, this one will be interesting but, housing I think can turn back on relatively quickly. Even in January and February the number of newly signed contracts to purchase homes were setting cycle highs, and so activity was robust. If you turn that sector back on it will be interesting to see how quickly it comes back though because confidence is a big element there. But certainly housing could also turn back on as we go through this and be an early beneficiary of kind of restarting the economy. Obviously it’s a good seasonal period of time for housing as well so there will be a little bit of push-pull there, but that’d be one I’d watch very closely.

Yesterday really kicked off first quarter earnings season. I think everybody expects earnings to be difficult, challenging, some would even put the adjective of ugly out there. First quarter won’t be nearly as bad as second quarter. We expect second quarter earnings to be the trough quarter, where you get the full frontal effect of all of the shutdowns. The reality is probably first quarter earnings decline about 10% year over year, is kind of where we expect them to come in. That’s, if you look at the sectors, 11, what we call gig sectors of the S&P 500, seven of which are projected to have negative year over year earnings growth, I think the bigger issue that comes into the earnings season is less about where those numbers settle out or do they go down 10% or 12% or 8%? It’s more about the market is watching very closely guidance coming from companies. So they want to know how many companies are just outright suspending their forward guidance because they don’t have transparency and clarity into the next quarter or two. They want to know what companies are projecting to do with share buyback programs, with their dividend, whether they’re going to support and pay their dividend. They also want to know and understand what companies are doing with capex spending, so capital spending. A lot of the capex budgets were just set in place right at the year-end of 2019, so they’re literally only 90 to 120 days old and they’ve done 180 degrees and need to get reset and in many cases, reversed. The two other things that I think are important, in the earning season to be watching for — how much have companies drawn down on their available lines of credit, in essence trying to bolster their balance sheets and make sure they’ve got a war chest of cash and liquidity as we go through this time, because none of them, they would tell you, know exactly when the economy turns back on or how it turns back on. So, they want to maintain a maximum amount of liquidity and availability on their balance sheet to work with. And the last thing that I think will be important and salient for earnings season is any guidance companies have on what they’re doing with their own labor or payrolls. Are they furloughing or laying people off? Often labor is the highest expense line or one of the top three expense lines on a company’s income statement, so that expense and managing that expense side will be something that they’ll be watching very close to what companies’ CEOs and CFOs have to say.