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QPW Market Update 6.10.2020

June 12, 2020

Wednesday June 10th, 2020

From Kori Lannon, Founding Partner / Private Wealth Advisor, Quadrant Private Wealth:

Dear Clients,

It has been about six weeks since we last reached out to you with one of our letters in this format.  Life seems to have gotten much easier.  The equity markets have nearly erased their severe losses of March.  U.S. government-stimulus-to-beat-all-stimulus is bolstering the economy.  The Fed is engaged in a no-holds-barred, whatever-it-takes policy strategy to save the economy.  Re-openings are occurring around the country and the around the world.  Phew.  Nothing but smooth sailing ahead.

If only we could be assured that today’s sense of security is not a false one.  Maybe that is the case.

However, there are many millions of Americans who are suffering still in the wreckage of COVID-19.  Some are the unemployed.  Some are the small business owners who remained shuttered.  Some are the sick, or have loved ones who are sick, or have lost loved ones.  Are there any of us who do not know first-hand someone who has been meaningfully impacted for the worse by COVID-19 and its collateral damage?  Just when we thought we might be seeing a faint and distant light at the end of the coronavirus tunnel, our country and its optimism surrounding re-opening are figuratively shoved in the chest by societal unrest of a magnitude not seen in our country since the 1960s.

There was a column in Barron’s newspaper last weekend by Steven M. Sears likening the behavior of the S&P 500 in the face of all this pain and destruction to an aloof Roman emperor Nero, obliviously playing his fiddle as Rome burned around his palace.  How callous, arrogant, ignorant, and out-of-touch the market is to soar while So Much Is Wrong.  Although, it is said that while the market is an emotional mechanism, it does not have emotions.

I don’t feel compelled to defend the market’s behavior.  I don’t think the market feels it needs defending.  Nevertheless, for me, the Nero reference immediately conjured up another, kinder image involving string instruments in a moment of chaos.  I’d like to try think of the market not as Nero, but more like Wallace Hartley.  Whether you saw James Cameron’s film production of the story or not, you are familiar with the history of the Titanic.  After the vessel hit an iceberg and began to sink, and thousands panicked around him, fearing for their lives, a violinist named Wallace Hartley and his classical bandmates played gentle music, trying to keep the passengers calm as the crew loaded the lifeboats.  It was the one thing Hartley and his colleagues could control, and they contributed what they could to make the best of a very bad situation.  Is this a naïve perspective on the market?  Absolutely.  Because there is such a large percentage of our society that benefits very little, if at all, from any soothing or salve the market’s stellar performance may provide.

Are the magnificent ships that are the U.S. economy and the S&P 500 doomed to go down?  Let’s hope a Titanic ending is well beyond a worst-case scenario!!  The purpose of this letter is not to prognosticate for or against the case for recovery of either.  And certainly not to suggest that we are all about to go down with the ship.

To shoplift an analogy from Lara Rhame, Chief U.S. Economist at FS Investments in Philadelphia, the market and the economy are not one and the same.  However they are inextricably connected to one another, like a kite and the person flying it.  Likewise, at Quadrant, we have an inextricable connection to the market.  As such, I don’t want to think of myself as an extension of Nero carelessly playing his fiddle while humanity suffers.  I prefer to associate with the likes of Wallace Hartley, doing my best to keep the peace in times of trouble.

I do think that we have times of trouble ahead, post-iceberg.  To what degree remains to be seen.  The twenty-two million jobs lost over a two-month period thru the end of April are three times the number lost over an eighteen-month period beginning with December 2007 in the financial crisis.  The U.S. is a consumer-based economy.   Put those two statements together, and I don’t believe we have only smooth waters ahead.

Like Wallace Hartley and his colleagues, your Quadrant team continues our commitment to what we can control.  We are working hard seeking out the best information and perspective available from the world-class resources with whom we have the privilege of working, and we apply what we distill into action, or sometimes purposeful inaction, in your portfolios.

We are living in unprecedented, uncertain, and volatile times.  We continue to wish you and your loved ones health and protection from coronavirus, as well as safety, the blessings of family and friends, and now thankfully, the joys of long sunlit days and outdoor experiences of summer.

Kori Lannon

Founding Partner

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