I will focus this week’s commentary on some of the observations and lessons I have learned from over the years either directly or by watching other portfolio managers responses to circumstances as they arrive.
We have now hit US earnings reporting season. Each quarter, US corporations report their prosperity and allow analysts to determine if they are on target to achieve annual expectations. The reason why quarterly earnings are so important is that they have a very high directional correlation with the general stock market.
2019 was a surprisingly strong year for both equity and bond investors and a measure of complacency entered markets. This was evidenced between October 2019 and February 2020 when equity market volatility declined despite global equity markets rising by ~13.5% to new all-time highs.
Based on evidence embraced by us early in the year, COVID-19 was presumed to be an uncontrollably infectious disease, likely to spread around the globe bringing human endeavour to its knees with a very high mortality rate.